Div 53of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years.

Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. ## Division 54 Exemption for certain payments made under structured settlements and structured orders ## 54‑1 Application of Division 54 of the I 54‑1 Application of Division 54 of the Income Tax Assessment Act 1997 (1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years. (2) However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date. ## Division 55 Payments that are not exempt from income tax ## 55‑1 Application of Division 55 of the I 55‑1 Application of Division 55 of the Income Tax Assessment Act 1997 Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. ## Division 59 Particular amounts of non‑assessable non‑exempt income ## Subdivision 59 ‑N—Native title benefits ## 59‑50 Indigenous holding entities 59‑50 Indigenous holding entities Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if: (b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time. ## Part 2 ‑20—Tax offsets (a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and (2) Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001 (the new Act) applies to the plant on this basis: (a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant’s opening adjustable value; and (b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and (c) if you excluded an amount from your assessable income under section 42‑290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999—the cost of the plant, and its opening adjustable value, are reduced by that amount; and (d) if subparagraph (1)(b)(ii) applies to you—you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi‑owner of the plant under the former Act continue. (3) If you were using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis: (a) for the diminishing value method—replace the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate you were using; and (i) replace the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate you were using; and (ii) increase the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note 1: Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced. > Note 2: Small business entities can choose to work out the decline in value of their depreciating assets under Division 328. (a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or (3) If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40‑70(1) or 40‑75(1) of the new Act that includes the plant’s effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and (2) For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets. (3) For a case where the plant is merged into another depreciating asset, section 40‑125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it. (b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and (a) you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and (b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU’s opening adjustable value. (1) Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001. (2) For a unit of software for which you were deducting amounts under Subdivision 46‑B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis: (d) you must use the same effective life you were using under Subdivision 46‑B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001. (1) This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day. (b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and (c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and (1) This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001. > Note: Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8). (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330‑80 of the former Act for your income year ending on 30 June 2001; and (c) in applying the formula in section 40‑75 of the new Act for the income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The remaining effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these: (i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and (ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (7) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and (b) the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of expenditure incurred in carrying on eligible quarrying operations—the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (i) you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day) after 30 June 2001; or (ii) the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day) after 30 June 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which the start day occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year. there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (1) This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330‑H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and (c) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (i) any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset); (i) any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (4) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (4) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (b) the expenditure would have been transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330‑H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for your income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (1) Despite subsections 40‑35(5), 40‑38(5) and 40‑40(4), there is no additional decline in the value of the notional asset referred to in those subsections if: (a) apart from this section, subsection 40‑35(5), 40‑38(5) or 40‑40(4) would apply because the real asset referred to in that subsection is disposed of; and (a) at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373‑35 of the former Act; and (b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day. (a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and (1) Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time). (2) Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time. (a) you have deducted or can deduct an amount under Subdivision 387‑G of the former Act for an amount (the qualifying amount) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and (b) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and (1) This section applies to you if you have deducted or can deduct an amount under Subdivision 400‑A of the former Act for an amount (the qualifying amount) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400‑A of the former Act. (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and (c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400‑15(3) of the former Act; and (1) Units of plant that you had allocated to a pool under Subdivision 42‑L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act. (a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and (c) in applying the formula in section 40‑70 of the new Act for your income year in which 1 July 2001 occurs—it has a base value equal to that opening adjustable value; and (d) you replace the component in the formula in subsection 40‑70(1) of the new Act that includes an asset’s effective life with the pool percentage you were using for the pool; and (e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40‑115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and (f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset. (3) An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item). > Note 1: You work out the decline in value of an item removed under this subsection under Subdivision 40‑B of the new Act, using the cost for it worked out under section 40‑205 of the new Act. (b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset. (2) The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year) in this way: (a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and (b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section. (a) for a unit of plant (including IRUs and expenditure on software that is not pooled)—its undeducted cost at the end of 30 June 2001; or (b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence—the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or (c) for transport capital expenditure—the entity’s amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or (d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (e) for expenditure on evaluating the impact on the environment of a project—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (f) for assets that were pooled under Subdivision 42‑M or 42‑L of the former Act—the closing balance of the pool at the end of 30 June 2001. (4) The asset’s base value for applying the formula in section 40‑70 of the new Act for the diminishing value method is that opening adjustable value. (5) The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an item of plant for which you were using the prime cost method—using the rules in section 40‑10 of this Act; and (c) for a unit of software for which the entity was deducting amounts under Subdivision 46‑B of the former Act—using the rules in subsection 40‑25(2) of this Act; and (f) for an amount of expenditure on evaluating the impact on the environment of a project—using the rules in section 40‑55 of this Act. (6) The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an amount of unrecouped expenditure under Division 330 of the former Act—using the rules in section 40‑35 of this Act; and (b) for an amount of transport capital expenditure under Division 330 of the former Act—using the rules in section 40‑40 of this Act; and (7) The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act. (a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑C of the former Act; or (b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑H of the former Act; or (c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387‑B of the former Act; or (d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; or (e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365. (9) The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001. (10) You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount). (11) You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount. (1) Subsections 40‑65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened: (b) you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act. (a) paragraph 40‑65(6)(a) of the Income Tax Assessment Act 1997 included both events set out in subsection (1) of this section; and (b) subsections 40‑65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events. (1) A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936. (2) An amount you have deducted or can deduct for a water facility under Subdivision 387‑B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40‑F of the new Act. (3) A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936. (a) you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40‑115 (about splitting a depreciating asset) or 40‑125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and (b) it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40‑72 of that Act; (2) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if: (c) it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40‑72 of that Act. (3) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset) before 10 May 2006 if: (b) the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and (d) it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40‑72 of that Act. (a) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you: (b) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001. (2) If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act. (3) Otherwise, Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section. (a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or (b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or (ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life. (1) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001. > Note: If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40\. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997. (1A) Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001. (1B) Subsection (1) applies to a mining, quarrying or prospecting right (the new right) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if: (i) the other company is a member of the same wholly‑owned group as the original holder and was a member of that group just before that day; and (ii) the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer. (1D) Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if: (b) the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001. (a) you acquired, under an interest realignment arrangement, an interest (a new interest) in a mining, quarrying or prospecting right; and (b) the interest was acquired in exchange for one or more other interests (old interests) in other mining, quarrying or prospecting rights; and Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001. (a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or (b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership; the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act. (3) An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that: (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act. (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act. (6) Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243. (7) An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if: (a) you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and (8) The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section. (c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act. (2) Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001. A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act. if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011. (2) The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011. (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset for an income year is the amount worked out under section 40‑130 if: (a) the income year is the year in which you start to use the asset, or have it installed ready for use, for a taxable purpose; and (b) subsection (2) (about businesses with turnover less than $500 million) applies to you for the year and for the income year in which you started to hold the asset (if that was an earlier year); and > Note 1: An effect of paragraph (1)(a) is that this Subdivision only applies to one income year per asset. See also subsection 40‑135(1). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $500 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. Exception—assets for which the decline in value is worked out under section 40‑82 or Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (3) However, this section does not apply to a depreciating asset for an income year if you work out the decline in value of the asset for the income year under any of the following: (1) For the purposes of paragraph 40‑120(1)(c) and section 328‑182, you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you: > Note: Section 328‑182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997. (i) entering into a contract under which you hold the post‑12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑12 March 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post‑12 March 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (8) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (9) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (10) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (1) For the purposes of section 40‑120, the decline in value for the income year in which paragraph 40‑120(1)(a) is satisfied (the current year) is: > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 12 March 2020 to 30 June 2020 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2020 to 30 June 2021. (a) 50% of the asset’s cost as at the end of the current year, disregarding any amount included in the second element of the asset’s cost after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997, assuming its cost were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (3) However, the amount worked out under subsection (2) for an income year cannot be more than the amount that is the asset’s cost for the year. (a) 50% of the sum of the asset’s opening adjustable value for the current year and any amount included in the second element of its cost for that year, disregarding any amount included in that second element after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997 assuming: (ii) for the prime cost method—the component “Asset’s \*cost” in the formula in subsection 40‑75(1) of that Act (as adjusted under that section) were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (b) for the prime cost method—the sum of its opening adjustable value for the income year and any amount included in the second element of its cost for that year. (1) The decline in value of a depreciating asset is not worked out under this Subdivision for an income year if this Subdivision already applied in working out the decline in value of the asset for an income year. (2) For an income year later than the year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (3) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (4) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) You may choose that the decline in value of a particular depreciating asset for an income year, and subsequent income years, is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the first income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. If this Subdivision applies to work out the decline in value of a depreciating asset you hold for an income year, no other provision of this Act or the Income Tax Assessment Act 1997 applies to work out that decline in value. (1) For the purposes of this Subdivision, you are covered by this section for a depreciating asset if, on or before 30 June 2023: (2) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (3) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or Exception—assets for which the decline in value is worked out under Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (a) the asset is allocated to a low‑value pool, or expenditure on the asset is allocated to a software development pool (see Subdivision 40‑E of the Income Tax Assessment Act 1997); or (b) you or another taxpayer has deducted or can deduct amounts for the asset under Subdivision 40‑F of the Income Tax Assessment Act 1997 (about primary production depreciating assets). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $5 billion; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this section. (ii) if the 2019‑20 income year ends on or before 6 October 2020—the sum of your ordinary income (if any) and statutory income (if any) for the 2019‑20 income year; and (c) the sum of the amounts worked out under subsection (3) for the 2016‑17, 2017‑18 and 2018‑19 income years exceeds $100 million. (b) next, work out the cost of each of those assets (including any amounts included in the second element of the asset’s cost at a time that is in the income year); (4) For the purposes of subsection (3), disregard an asset if, at the time you first used the asset, or had it installed ready for use, for a taxable purpose: (a) it was not reasonable to conclude that you would use the asset principally in Australia for the principal purpose of carrying on a business; or (5) For the purposes of paragraph (3)(b), to work out the cost of a depreciating asset that is capital works (see section 43‑20 of the Income Tax Assessment Act 1997): (a) disregard section 40‑45 of that Act and work out the cost of the capital works using Subdivision 40‑C of that Act; and (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under subsection (3) if: (a) where section 40‑155 covers you for the current year (regardless whether section 40‑157 also covers you for the current year)—an exclusion applies to you and the asset for the current year under section 40‑165 (about exclusions for businesses with turnover of $50 million or more); or (ii) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s start time occurs in the current year—the asset’s cost as at the end of the current year, disregarding any amount included in the asset’s cost after 30 June 2023; or (b) if the asset’s start time occurred in an earlier year—the sum of its opening adjustable value for the current year and any amount included in the second element of its cost for the current year, disregarding any amount included in the asset’s cost after 30 June 2023. > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 6 October 2020 to 30 June 2021 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2021 to 30 June 2022. (a) where paragraph 40‑160(2)(a) applies—section 40‑155 would not cover you for the income year if the reference in that section to $5 billion were instead a reference to $50 million; and (i) entering into a contract under which you hold the post‑6 October 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑6 October 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of satisfying paragraph 40‑160(1)(a) for the post‑6 October 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you already satisfied paragraph 40‑160(1)(a) of this Act for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (9) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (1) For the purposes of subsections 40‑160(2) and 40‑170(1A), an exclusion applies to you and an asset for an income year if any of the exclusions in this section applies in relation to the asset. (4) This exclusion applies in relation to the asset if the asset is available for use, at any time in the income year, by any of the following: (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under this section if: (ii) you started to use the asset, or have it installed ready for use, for a taxable purpose in an earlier income year; and (b) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under section 40‑82 of the Income Tax Assessment Act 1997—the amount worked out under subsection (3); or (b) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under Subdivision 40‑BA of this Act—the amount worked out under subsection (4); or Assets affected by section 40‑82 of the Income Tax Assessment Act 1997 (about assets costing less than $150,000, medium sized businesses) (a) the amount that would be the asset’s decline in value for the year under section 40‑82 of the Income Tax Assessment Act 1997, assuming the reference in subparagraph 40‑82(3A)(b)(ii) of that Act to 31 December 2020 were instead a reference to the 2020 budget time; and (a) the amount that would be worked out under paragraph 40‑130(2)(a) or (4)(a) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(a) and (4)(a) to 30 June 2021 were instead references to the 2020 budget time; and (c) the amount that would be worked out under paragraph 40‑130(2)(b) or (4)(b) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(b) and (4)(b) to “the amount worked out under paragraph (a)” were instead references to “the amounts worked out under paragraphs 40‑170(4)(a) and (b)”. (a) the amount that would be the asset’s decline in value for the year under Division 40 of the Income Tax Assessment Act 1997, disregarding any amounts included in the eligible second element worked out under section 40‑175 of this Act for the asset for the year; and The amount worked out under this section (the eligible second element) for a depreciating asset for an income year is the sum of any amounts included in the second element of the asset’s cost at a time that is in both of the following periods: (1) For an income year later than a year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (2) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (3) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) This section applies if the decline in value for a depreciating asset for an income year is worked out under this Subdivision, and at a time (the balancing adjustment time) in a later income year: (i) it becomes not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (b) none of the requirements in paragraphs 40‑295(1)(a), (b) or (c) of the Income Tax Assessment Act 1997 are satisfied in relation to the asset. (2) For the purposes of Subdivision 40‑D of the Income Tax Assessment Act 1997 assume that, at the balancing adjustment time, you stop using the asset, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again. (3) For the purposes of section 40‑180 of the Income Tax Assessment Act 1997 assume that the reference in item 3 of the table in subsection 40‑180(2) of that Act to “because you stop using it for any purpose expecting never to use it again” were instead a reference to “because of section 40‑185 of the Income Tax (Transitional Provisions) Act 1997”. (4) If a balancing adjustment event happens to a depreciating asset you hold because of this section, this Subdivision cannot apply to work out the decline in value of the asset for a later income year. (1) You may choose that the decline in value of a particular depreciating asset for an income year is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year. (1) Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40. (a) you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset: (ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and (4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day. (5) The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if: (i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or (ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and  > sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose. (7) Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens: (a) if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b). (i) an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and (ii) the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and (3) The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount. (a) on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and (c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and (ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal; (2) There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal. (3) Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount. If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997. (a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and (b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and: (i) the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, the R&D entity is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—a clawback amount under section 355‑447 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑466 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. (b) section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions. > Note 2: The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and: (i) the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset; (ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, an R&D entity (the partner) that is a partner in the R&D partnership and is entitled to one or more new law deductions for one or more income years for the asset, is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—a clawback amount under section 355‑449 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑468 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s new law deductions mentioned in paragraph (2)(b) of this section. (4) Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event. > Note: Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions. (1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant. (b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and (3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it. (a) there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and (b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act. (2) The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor. (3) The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and <table cellspacing="0" cellpadding="0" style="width:364.2pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:353.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading" style="page-break-inside:avoid"><span>Conditions for small business taxpayers retaining accelerated rates</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Condition</span></p></td></tr></thead><tbody><tr><td style="width:21.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:321.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>The transferee must have been a small business taxpayer for the income year (the </span><span style="font-weight:bold; font-style:italic">start year</span><span>) that includes the time when the entity first used the plant, or first had it installed ready for use.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>2</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>At that time, neither of these applies:</span></p><p class="Tablea"><span>(a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;</span></p><p class="Tablea"><span>(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection</span><span> </span><span>(5).</span></p></td></tr></tbody></table> ``` (4) For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership. (5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement. (a) for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or (i) replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and (ii) increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).  (b) if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11). (c) that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and (d) that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and (e) that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity. (a) for taxable supplies (if any) the entity makes during the year in the course of carrying on a business—the value (as defined by section 9‑75 of the GST Act) of the supplies; and (b) for other supplies the entity makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies. (1) The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for: (a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (c) for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or (d) for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant. (3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115. (4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain. (5) Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee. (i) the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or (a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and (1) A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act. (2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year. For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if: Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act. (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset): and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply. (i) for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or (ii) for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and (c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act. (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and (2) Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act. The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under: (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on: (2) You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act. (3) A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under: (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and (2) Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act. A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act. The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001. If: (d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act; (a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and (a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and (b) the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and (c) paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997. Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years. (1) For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section. (b) the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (b) that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (1) There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea" style="page-break-after:avoid"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a); and</span></p><p class="Tablea" style="page-break-after:avoid"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (b) disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (f) an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division. (4) If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45‑5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest. (5) If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45‑10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest. Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Disregard the use of the following amounts in determining (for the purposes of Subdivision 50‑A of the Income Tax Assessment Act 1997 whether a fund established before 1 July 1997 operates and pursues its purposes in Australia: Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years. (2) However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date. Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if: (b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time. Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years. 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years (1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act. <table cellspacing="0" cellpadding="0" style="margin-left:56.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:258.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Application provisions for specific sections</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-size:9pt; font-weight:bold">Item</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">This section of the </span><span style="font-size:9pt; font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-size:9pt; font-weight:bold"> ...</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">Applies as described in this provision of this Act ...</span></p></td></tr></thead><tbody><tr><td style="width:24.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55(1)</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>95</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>8</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td></tr></tbody></table> ``` (a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and (b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997. > Note: Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year. (b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997; sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997). > Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock. (3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997. (a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and (b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936; > Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal. #### 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997. (1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year. (2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936. (3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year: (a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners; (b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed. > Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year. > Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year. (b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year; the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year. (2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. (3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2). #### 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997. #### 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business (1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. (2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity. > Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997. (1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. (2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value. > Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997. #### 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year. (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. > Note: Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. > Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given). (5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act). (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment. > Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%. (5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%. (6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.  > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section. (b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4). Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age. Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later. Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies. Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3. (4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997. (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%. > Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986. (5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D. > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. (a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and (b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year). (3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and (2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual: (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income. > Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F. > Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997. > Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997. #### 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 (1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012. (2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies. (3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act. (b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009. (2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if: (i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest; (iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or (i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest; (iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009. (2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time. (4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2): (a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and (b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being: (ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and (c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and (d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if: (i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or (ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and (e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and (i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and (ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and (g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest. (a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced: (i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or (ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and (b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5. (2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right. (3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right. (2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. (3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section. Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years. (1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision. > Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision). > Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936). > Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997. (a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936. (1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936. (2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997. > Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997. (3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and (d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; (f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time. > Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and (d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015. (a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or (4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if: (b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset. The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year. (a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and (1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied: (b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and (d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works). (3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936. Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936. (b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006. (2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement. > Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement. Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual: (b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her. 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act (1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee). (2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year: (3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection. #### 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997. Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936). (2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if: (a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; (a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011); (b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986. > Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section. If: (a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and (b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936; Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995. (1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997. (2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997. (3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997. (4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997. > Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one. Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year: (a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and (b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year; the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation. Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset. (b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section); > Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply. (1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if: (a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and (2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value. (4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value. (a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997. (2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less. (1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936: (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. (1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if: (2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by: (a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or (a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or (2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period. Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year: If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997. (1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002. (2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset. (3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required. (i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and (ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and (c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and (f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997). (a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or (1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:  > total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part. (a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or (2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section. (3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1). (1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences. > Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997. (c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets). (4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act. (5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act. Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement. (a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and (2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time. (a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and (ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs. (2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer. (a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and (b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest; (2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event. (3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly. (4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly. <table cellspacing="0" cellpadding="0" style="width:362.55pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:351.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Creating a CGT asset</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">CGT event number</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Applicable amount</span></p></td></tr></thead><tbody><tr><td style="width:50.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D1</span></p></td><td style="width:290.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the incidental costs the originating company incurred that relate to the CGT event</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D2</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the option</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D3</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the right</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>F1</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred on the grant, renewal or extension of the lease</span></p></td></tr></tbody></table> ``` (5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day. A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision. (a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996. (b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. (b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend. (3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities. (1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company. (2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred. (3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company. (1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of: (2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of: (3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note. (1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised. (b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and (ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act. You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and (b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996. (c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and (c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over. (3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. (a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and (c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and (d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act. (3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division. Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years. A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: (1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day. (2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice. (a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and (b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and (a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and (b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and (c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group. (5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004. (6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection. (1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss): (b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions); and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time: (i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or (e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and (f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and (ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred; (2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if: (a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these: (i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset; (ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and (3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act. (a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and (b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section. (5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of: (a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and (b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset. Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. (ii) that could have been deducted, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the deduction had not been limited by the company’s income for that income year; and (ii) that could have been applied, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the application of the loss had not been limited by the company’s capital gains for that income year. 170‑C Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred #### 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years. #### 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). #### Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997. Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997. If: (a) all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (d) that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and (e) the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place. Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years. > introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament. Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day. #### Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting #### 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B. (1) The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day. (2) No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted. #### 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting (1) Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if: (a) the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and (b) none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount. (2) No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount. (1) This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account. (2) For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. > Note 2: If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60. (3) For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)). (4) For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. (5) The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if: (a) during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and (b) the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section. (a) the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and (b) during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components. (7) For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. (8) Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it: (b) the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component. (9) Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component. (10) For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002: (b) lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination; (c) a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination); (e) the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination); (f) the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination). Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period: 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows: (a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and (i) in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and (ii) in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. > Note: A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002. #### 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002: (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:23.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:87.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A franking surplus</span></p></td><td style="width:220.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.009.png" width="175" height="58" alt="Start formula Amount of the class A franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.010.png" width="190" height="56" alt="Start formula Amount of the class B franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.011.png" width="190" height="56" alt="Start formula Amount of the class C franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` #### 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus): (a) a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Original surplus</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:85.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>class A</span></p></td><td style="width:220.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.012.png" width="169" height="38" alt="Start formula Amount of the original class A surplus times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.013.png" width="169" height="38" alt="Start formula Amount of the original class B surplus times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.014.png" width="169" height="38" alt="Start formula Amount of the original class C surplus times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (4) If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit): (a) a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company. (5) The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking deficit into 1997 Act franking debit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Original deficit</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking debit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(4)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:70.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A</span></p></td><td style="width:235.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.015.png" width="164" height="38" alt="Start formula Amount of the original class A deficit times start fraction 39 over 61 end fraction end formula "></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.016.png" width="164" height="38" alt="Start formula Amount of the original class B deficit times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.017.png" width="164" height="38" alt="Start formula Amount of the original class C deficit times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (2) A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if: (c) the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions. (3) The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if: (b) the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and (1) While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit. (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year. (3) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: > Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act. (1) The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account. (a) a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time; (3) If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if: (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity. #### 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If: the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time. (1) Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections. (2) If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year. Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year. Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year. (5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in: that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement. (6) The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (7) The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (2) The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (3) The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (i) are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and (a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and (b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section. (a) whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and (1) This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002. (a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and (3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded. (1) This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002; (2) If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (3) If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (4) If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. (5) If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows: (a) any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and (i) in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and (ii) in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. #### 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF.  #### 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act). (2) If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus): (a) a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF. (4) If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit): (a) a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF. This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period). (1) The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period: (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (1) The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period. (2) The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner. (3) The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5. (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and (d) the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner; the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received. (3) A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time: (1) A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends. (2) However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period. (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (a) the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed: (d) the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and (e) the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return. (2) The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day. (1) The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period. (2) The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made. Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period. (b) on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax); the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed: (c) the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and (d) the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return. (2) The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day. The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period: If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day. If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and If: (a) a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and (b) the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment; In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment. If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment. The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with. If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953. (1) Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period. (a) the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and (b) the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3); the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on: (c) if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or If: Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax. Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division. If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997. (a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day: (3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002. (a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002: > Note: As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date. (b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997. In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003. (1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year. (a) a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of: (i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time; (iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period; (2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if: (b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time: (ii) the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. > Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. > Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. (7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table: <table cellspacing="0" cellpadding="0" style="width:365.35pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount of the franking credit and the exempting debit</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">If:</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the credit and debit is:</span></p></td></tr></thead><tbody><tr><td style="width:22.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The period starts immediately after 7.30</span><span> </span><span>pm by legal time in the Australian Capital Territory on 13</span><span> </span><span>May 1997</span></p></td><td style="width:141.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Both these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was not in surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>All these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was in surplus at the start of the period;</span></p><p class="Tablea"><span>(c) the surplus in the account at the switch time is greater than the surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the franking surplus in the Australian company’s franking account at the switch time; and</span></p><p class="Tablea"><span>(b) the franking surplus in the Australian company’s franking account at the start of the period</span></p></td></tr></tbody></table> ``` (a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and (b) the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period. Subdivision 235‑I of the Income Tax Assessment Act 1997 applies to assets acquired by the trustee of an instalment trust in: (1) Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years. (2) However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time). (3) The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997. Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997. (2) Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in: (1) Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that: (b) is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose. (a) if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007. > Note: To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997. (b) contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option; the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option. (3) For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5). (4) If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is: (a) the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less (b) the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest. (5) If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is: (6) If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil. (1) If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one. (2) If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year. (3) If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year. (a) for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and (b) for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year: Step 1. Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. Step 2. Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3). Step 3. If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year. > Note: Example: Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75): (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred: (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times: (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate. Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008. (a) the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and (b) the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities: (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (i) the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or (ii) the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and (f) none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made: (i) Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event; (ii) a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year. (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (b) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (c) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year #### 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year (a) the requirements set out in paragraphs 275‑610(1)(a), (b) and (c) of the Income Tax Assessment Act 1997 are satisfied in respect of an amount of non‑arm’s length income of a managed investment trust in relation to an income year; and (b) the managed investment trust became a party to the scheme mentioned in paragraph 275‑610(1)(a) of that Act before the day on which the Bill that became the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 was introduced into the House of Representatives; and Division 276 of the Income Tax Assessment Act 1997 as inserted in that Act by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (the amending Act) applies as set out in subitem 1(1) of Schedule 8 to the amending Act. (b) if the trustee of the trust has made a choice for the purposes of paragraph 1(1)(b) of Schedule 8 to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016—the first income year starting on or after 1 July 2015; or (c) if the trustee of the trust has made a choice for the purposes of subparagraph 276‑10(1)(e)(i) of the Income Tax Assessment Act 1997 in respect of the 2016‑17 income year—that income year. (c) the trust is an AMIT for an income year (the discovery year) that is the starting income year or a later income year. (1) This section applies if the trust has an under or over of a character in the discovery year relating to the base year. (b) if, at a time, the trust sent its members distribution statements for an income year that is prior to the starting income year—assume that the trust sent those members AMMA statements for that income year at that time. (3) For the purposes of Division 276 of the Income Tax Assessment Act 1997, treat the under or over mentioned in subsection (1) as an under or over of the AMIT, in the discovery year relating to the base year, of the character mentioned in that subsection. (a) had the under or over mentioned in subsection (1) been discovered before the starting income year, this Act would have operated to produce a particular effect (the pre‑AMIT scheme effect) for the base year in relation to the amount or amounts reflected in the under or over; and 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT #### 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT (b) working out the amount (if any) of the entity’s capital gain under subsection 104‑70(4) of the Income Tax Assessment Act 1997. (3) For the purpose of working out the amount of the non‑assessable part mentioned in paragraph 104‑70(1)(b), treat the following provisions as being in operation at the time the payment was made: (b) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in paragraph (a). (4) Subsection (3) does not apply to the extent (if any) that the entity, in the income tax return that it lodged for the income year in which the payment was made, included the amount of the payment in its assessable income for that income year. (5) For the purposes of section 118‑20 of the Income Tax Assessment Act 1997, treat this section as being in Part 3‑1 of that Act. (2) The Commissioner cannot amend the entity’s assessment for the income year in which the payment was made in a particular way if: (b) the Commissioner could not amend the assessment in that way if the following provisions were in operation at the time the payment was made: (ii) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in subparagraph (i); and Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82‑10F). (2) The object of this section is to apply (with modifications) provisions limiting deductibility in respect of certain contributions made during the period that: (a) Subdivisions AA and AB of Division 3 of Part III of the Income Tax Assessment Act 1936, as in force just before they were repealed by the Superannuation Legislation Amendment (Simplification) Act 2007; (b) any other provision of the Income Tax Assessment Act 1936, or of any instrument made under that Act, to the extent that it relates to the operation of those Subdivisions; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of those Subdivisions. (b) the deduction limit mentioned in section 82AAC for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (c) the deduction limit mentioned in section 82AAT for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (d) Division 290 of the Income Tax Assessment Act 1997 did not apply to contributions made during the income year mentioned in paragraph (a). (2) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of a defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection and subsection (4), the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 5 September 2006; (b) the defined benefit interest mentioned in paragraph (2)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 5 September 2006, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (2)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (4) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of the defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection, the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 12 May 2009; (b) the defined benefit interest mentioned in paragraph (4)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 12 May 2009, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (4)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (1) The object of this section is to apply (with modifications) provisions relating to excess non‑concessional contributions tax in respect of certain contributions made during the period that: (b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision. (ea) in a case where paragraph 292‑95(1)(b) of that Act would have allowed the contribution mentioned in that paragraph to be made at a time within that period—that paragraph allowed the contribution to be made on or before 30 June 2007; and (f) paragraph 292‑95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and (fa) in a case where subsection 292‑100(2), (4), (7) or (8) of that Act would have allowed the contribution mentioned in that subsection to be made at a time within that period—that subsection allowed the contribution to be made on or before 30 June 2007; and (g) paragraph 292‑100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and (h) contributions made during that period that are covered under section 292‑100 of that Act reduce the person’s CGT cap amount for the 2007‑2008 financial year in accordance with subsection 292‑105(2) of that Act (and despite subsection (1) of that section); and (i) if the conditions in subsection (4) are satisfied—the person’s excess non‑concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and (b) the Commissioner gives the person a transitional release authority under subsection 292‑80A(2) in response to the application; and (c) the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292‑80B within 21 days after the date of the release authority; and (d) the superannuation provider pays the person the amount required under section 292‑80C in relation to the transitional release authority. (b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act). (6) The amount to be included in the first person’s amount of non‑concessional contributions under subparagraph (3)(b)(ii) is the sum of: (a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and (b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made. (c) under Division 295 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)), the contribution is included in the assessable income of the superannuation provider in relation to the superannuation plan to which the contribution is made; and (8) For the purposes of paragraph (7)(b), treat the person as an employee of the other entity if the person would be treated as an employee of the other entity under Division 290 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)). (1) A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007. (2) The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292‑80(3)(b)(i), the person would have excess non‑concessional contributions for the financial year mentioned in paragraph 292‑80(3)(a). (4) For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out: The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 21 days after the date of the release authority. (1) A superannuation provider that has been given a transitional release authority in accordance with section 292‑80B must pay to the person within 30 days after receiving the release authority the least of the following amounts: (a) if the person requests the provider in writing to pay a specified amount in relation to the release authority—that amount; (c) the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person in complying superannuation plans. > Note 1: Section 288‑95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection. > Note 2: Section 288‑100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority. > Note 3: For reporting obligations on the superannuation provider in these circumstances, see section 390‑65 in Schedule 1 to the Taxation Administration Act 1953. (2) The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person in complying superannuation plans. (3) Section 307‑125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section. (a) your non‑concessional contributions cap for the 2015‑2016 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsection 292‑85(7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 applies after the commencement of this section as if: (d) subsection 292‑85(6) of that Act as so amended had been applied (taking into account paragraph (c) of this subsection) for the purposes of working out your non‑concessional contributions cap for the 2016‑2017 financial year. (2) For the purposes of working out your non‑concessional contributions caps for the 2017‑2018 financial year and the 2018‑2019 financial year, if: (a) your non‑concessional contributions cap for the 2016‑2017 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsections 292‑85(6) and (7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 apply after the commencement of this section as if the amount worked out under subsection 292‑85(5) of that Act as so amended were $380,000. (3) To avoid doubt, this section does not affect your non‑concessional contributions cap for any financial year that ended before 1 July 2017. The tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your non‑concessional contributions (see section 292‑90 of the Income Tax Assessment Act 1997) for the financial year. (2) Subject to section 294‑55, the amendments of Division 294 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Treasury Laws Amendment (2017 Measures No. 2) Act 2017 apply on and after 1 July 2017. Despite sections 294‑30 and 294‑140 of the Income Tax Assessment Act 1997 (which are about when you have excess transfer balance), you do not have excess transfer balance in your transfer balance account on any day in the period of 6 months beginning on 1 July 2017 if: (a) the only transfer balance credits in the account in that period arose under item 1 of the table in subsection 294‑25(1) of that Act (which is about superannuation income streams you have just before 1 July 2017); and (b) the sum of those transfer balance credits exceeds your transfer balance cap, but is less than or equal to $1,700,000; and (c) at the end of the period, the sum of all the transfer balance debits arising in your transfer balance account equals or exceeds the amount of the excess from paragraph (b). (1) Despite subsection 294‑10(2), a transfer balance credit arises under item 4 of the table in subsection 294‑25(1) of the Income Tax Assessment Act 1997 only in relation to a borrowing that arises under a contract entered into on or after 1 July 2017. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2017 is treated as if it arose under a contract entered into before 1 July 2017 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) on 1 July 2017, a transfer balance debit arose in your transfer balance account under item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997; and (b) the sum of all the transfer balance credits that arise in your transfer balance account under item 1 of the table in subsection 294‑25(1) of that Act exceeds the amount that would, apart from this section, be the amount of that debit. (2) Despite column 2 of item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997, the amount of the transfer balance debit is instead equal to the sum worked out under paragraph (1)(b) of this section. 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain > The object of this Subdivision is to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the following legislative changes: (a) the introduction of a transfer balance cap (as a result of Schedule 1 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016); (b) the exclusion of transition to retirement income streams (and similar income streams) from being superannuation income streams in the retirement phase (as a result of Schedule 8 to that Act). (a) starting on the start of the day on which the Bill that became the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 was introduced into the House of Representatives; and (a) at the start of the pre‑commencement period, a CGT asset of a fund is a segregated current pension asset of the fund; and (i) at a time (the cessation time) in the pre‑commencement period, the asset ceases to be a segregated current pension asset of the fund; or (ii) at the start of 1 July 2017 (also the cessation time), the asset ceases to be a segregated current pension asset of the fund because it supports a superannuation income stream covered by subsection 307‑80(3) of the Income Tax Assessment Act 1997; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (b) the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year is greater than nil; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and #### 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑115(3)(a), the fund makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the fund’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Subsection 295‑390(1) of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). > 2016‑17 non‑exempt proportion means 1 minus the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year. #### 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset (i) the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997 in respect of the trust for the 2016‑17 income year; (ii) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year; and (d) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and #### 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑125(3)(a), the trust makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the trust’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Section 295‑400 of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). (a) unless paragraph (b) applies—1 minus the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997; or (b) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage worked out by subtracting the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year from 100%. This Subdivision applies to an entity that is the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust. For the purposes of this Subdivision, an asset is a 30 June 1988 asset of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust if the entity owned it at the end of 30 June 1988. > Note: Section 295‑90 of the Income Tax Assessment Act 1997 treats these assets as having been acquired on 30 June 1988. (1) The first element of the cost base of each 30 June 1988 asset of the entity’s is the greater of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). (2) The first element of the reduced cost base of each 30 June 1988 asset of the entity’s is the lesser of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). the market value of the asset as at the end of 30 June 1988 is the average of the highest and lowest trade prices for identical assets recorded on 30 June 1988 in whichever of the following markets is applicable: (d) if, on that date, there was a State capital city market (other than the Sydney market) that recorded a higher volume of trading than the Sydney market in identical assets—that State capital city market; (2) For the purposes of this section, an asset is taken to have been listed on an Australian stock exchange on 30 June 1988 if, and only if, on that day the asset had the status of having been granted official quotation by a securities exchange within the meaning of the former Securities Industry Act 1980 or the law of a State or Territory corresponding to that former Act. (b) at any time during the period commencing at the time when the shares were acquired and ending at the end of 30 June 1988, the company paid an amount that was not a dividend to the entity in respect of the shares; (b) at any time during the period commencing at the time when the interest or unit was acquired and ending at the end of 30 June 1988, the trustee of the trust paid an amount to the entity in respect of the interest or unit, being: (i) in a case where the entity was exempt from tax for the year of income in which the payment was made—an amount that, if the entity had not been exempt from tax, would not have been the entity’s assessable income; or the cost base to the entity of the interest or unit as at 30 June 1988 is reduced by so much of the amount as is not attributable to a deduction allowed under former Division 10C or 10D of the Income Tax Assessment Act 1936. (1) Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (2) and (3) of this section apply if an entity exercises rights or options as mentioned in that section to acquire: (b) the greater of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (b) the lesser of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (4) The payment referred to in subsection (2) or (3) can include giving property. To the extent that the payment does, use the market value of the property in working out the amount of the payment. (1) A notice given under subsection 82AAT(1A) or (1CB) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑170 of the Income Tax Assessment Act 1997. (2) A notice given under subsection 82AAT(1C) or (1CD) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑180 of the Income Tax Assessment Act 1997. (1) A proportion of the ordinary income and statutory income of a continuously complying fixed interest ADF of an income year that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).  > Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the income year. > Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the income year. (4) A choice for the purposes of the definition of reckoning time in subsection (5) must be made on or before the date of lodgment of the income tax return of the ADF for the income year to which the choice relates, or before a later day allowed by the Commissioner. > continuously complying fixed interest ADF, in relation to an income year (the current year), means a fund that is a fixed interest complying ADF in relation to each of the following years: > current 25 May balance, in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time: (b) subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 September 1989 is to be added to the balance; (b) a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that day, made a deposit with the ADF that consisted wholly or partly of the roll‑over (as defined in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 as in force on that day) of an eligible termination payment as so defined, being an eligible termination payment that included a concessional component (as so defined). > fixed interest complying ADF, in relation to a year of income, means a complying ADF where both of the following conditions are satisfied: (a) not less than 90% of the amount that, apart from this section, would be the assessable income of the ADF of the income year (other than non‑arm’s length income or amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997) consists of any one or more of the following: (ii) any profit arising on the disposal, redemption, cancellation or maturity of a CGT asset referred to in paragraph 295‑85(3)(b) of the Income Tax Assessment Act 1997; (iii) an amount included in assessable income under Division 16E of Part III of the Income Tax Assessment Act 1936 (or would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply); (ii) virtual PST life insurance policies (as defined in the Income Tax Assessment Act 1997) issued by a life insurance company. > original 25 May balance, in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988. > reckoning time, in relation to an ADF in relation to an income year, means the beginning of the income year, or such other time during the income year as the ADF chooses in accordance with subsection (4). (6) This section does not apply to an ADF in relation to an income year unless the whole of the benefit that would accrue to the ADF from the application of this section in relation to the income year has been, or can reasonably expected to be, passed on to eligible depositors. An election made by the trustee of a complying superannuation fund under subsection 279(4) of the Income Tax Assessment Act 1936 that had effect for the income year of the fund in which 30 June 2007 occurs continues to have effect as if it had been made under section 295‑465 of the Income Tax Assessment Act 1997. Subdivisions 295‑I (no‑TFN contributions) and 295‑J (Tax offset for no‑TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006‑2007 income year ends on a day (the end day) after 1 July 2007 as if: (b) the entity’s no‑TFN contributions income for the entity’s 2007‑2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007‑2008 income year if the contributions concerned had been made in the entity’s 2007‑2008 income year. (2) Division 301 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section because you are a member of the fund in the same way as it would apply if the payments were superannuation member benefits paid to you from a complying superannuation fund. For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. Subdivision 301‑F of the Income Tax Assessment Act 1997 applies in relation to income years starting on or after 1 July 2007. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to the following in respect of an income year that starts on or before 1 July 2021: (b) the amendments of the Income Tax Assessment (1997 Act) Regulations 2021 made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023. (a) a superannuation benefit (the trigger benefit) was paid to a person in the 2020‑21 income year or an earlier income year; and (c) the trigger benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; and (2) The Commissioner cannot amend an assessment on the basis that a superannuation benefit paid to the person is a superannuation income stream benefit because of the amendments made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 if: (iii) the superannuation benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (a) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (b) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. (1) The Minister may, by legislative instrument, make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions) that: (a) relate to the amendments or repeals made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023; and (2) Without limiting subsection (1), rules made under this section before the end of the period of 12 months starting on the day that Schedule commences may provide that provisions of that Schedule, or any other Act or instrument, have effect with any modifications prescribed by the rules. Those provisions then have effect as if they were so modified. (2) Division 302 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section after another person’s death, because the other person was a member of that fund, in the same way as it would apply if the payments were superannuation death benefits paid to you from a complying superannuation fund. For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if: (b) just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. (2) For the purposes of Subdivision 82‑B of Division 82, Division 302 and section 303‑5 of the Income Tax Assessment Act 1997, the definition of death benefits dependant in section 302‑195 of that Act applies as if paragraphs (a) and (b) of the definition were replaced with the following paragraphs: (a) a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008 or a person who was formerly such a spouse; or (b) a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008, who is aged less than 18. (ii) a superannuation guarantee payment, a small superannuation account payment, an unclaimed money payment, a superannuation co‑contribution benefit payment or a superannuation annuity payment. (2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you at a time in the period: (i) a condition of release specified in item 107A or 207AA of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; or (ii) a condition of release specified in item 109AA of the table in Schedule 2 to the Retirement Savings Accounts Regulations 1997. (1) This section applies to a superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with section 292‑80B. (2) The superannuation benefit is not assessable income and is not exempt income to the extent that it does not exceed the amount mentioned in subsection (3). (3) The amount is the amount of excess non‑concessional contributions stated in the release authority in accordance with paragraph 292‑80A(3)(a), reduced (but not below zero) by the amount of any superannuation benefit that was not assessable income and not exempt income under a previous operation of subsection (2) in relation to the release authority. (4) The superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3). (a) you have an interest in a FIF (within the meaning of Part XI of the Income Tax Assessment Act 1936, as in force just before the commencement of item 37 of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010) (the paying fund); and (b) Subdivision 305‑B of the Income Tax Assessment Act 1997 applies in relation to the paying fund (see section 305‑55 of that Act); and (c) the paying fund transfers an amount to a complying superannuation fund in respect of you during the deduction year; and (d) you choose under section 305‑80 of the Income Tax Assessment Act 1997 that the amount, or part of the amount, is to be treated as assessable income of the complying superannuation fund; and (e) immediately before the transfer happens, there is a post‑FIF abolition surplus (within the meaning of the Income Tax Assessment Act 1936) for the paying fund in relation to you; and For the purposes of the definition of specified roll‑over amount in the Income Tax Assessment Act 1997, treat the taxable component of a directed termination payment (within the meaning of section 82‑10F) as the element untaxed in the fund of a superannuation benefit that is a roll‑over superannuation benefit. (1) This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007. > Note: This section also applies to an income stream replacing an earlier one because of an involuntary roll‑over (see section 307‑127). (2) Despite subsection 307‑125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows: (a) first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007); (b) next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits. The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit. (3) Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened: (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day; (ba) the holder of the superannuation interest is aged 60 or above on 1 July 2007, if none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day. (a) treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and (b) work out the tax free component of the superannuation interest for the purposes of section 307‑125 of the Income Tax Assessment Act 1997 under subsections (6) and (6A). (i) an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and (ii) the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time; (b) next, work out the unused undeducted purchase price (within the meaning of paragraph (a) of the definition of that term in subsection 27A(1) of the Income Tax Assessment Act 1936 just before the commencement of this section, and disregarding paragraphs (b) and (c) of that definition) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007; (c) next, work out the pre‑July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this section) of the eligible termination payment. (a) at least one superannuation income stream benefit was paid from the superannuation income stream before 1 July 1994; or (b) section 27AAAA of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007) applied to the superannuation income stream just before 1 July 2007; (7) For the purposes of paragraph (6)(c), disregard the value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment. (8) If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as: (b) if 1 or more other events mentioned in subsection (3) happened before the commutation—the time just before the earliest of those events happens. (a) references in that section to the later income stream (in relation to a time, or event happening, before the payment of that involuntary roll‑over superannuation benefit) include references to the earlier income stream; and (b) references in that section to the superannuation interest supporting the later income stream (in relation to a time, or event happening, before the payment of that benefit) include references to the earlier interest. (1) This section applies for the purposes of working out the amount of your total superannuation balance just before 1 July 2017. (2) The transfer balance mentioned in paragraph 307‑230(1)(b) of the Income Tax Assessment Act 1997 just before 1 July 2017 is taken to be equal to: (a) the sum of the transfer balance credits (if any) in your transfer balance account just after the start of 1 July 2017; less (b) the sum of the transfer balance debits (if any) arising in your transfer balance account on 1 July 2017 under item 4 of the table in subsection 294‑80(1) of that Act (about payment splits). (1) Section 307‑231 of the Income Tax Assessment Act 1997 applies in relation to borrowings that arise under contracts entered into on or after 1 July 2018. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2018 is treated as if it arose under a contract entered into before 1 July 2018 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) treat a deduction made under former section 279 of the Income Tax Assessment Act 1936 as having been made under section 295‑465 of the Income Tax Assessment Act 1997 instead; and (b) treat a deduction made under former section 279B of the Income Tax Assessment Act 1936 as having been made under section 295‑470 of the Income Tax Assessment Act 1997 instead. If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007‑2008 income year is, despite subsection 307‑345(1), the total of: (b) the amount by which $140,000 exceeds the upper limit for the 2006‑2007 income year (worked out under section 159SG of that Act). Division 316 of the Income Tax Assessment Act 1997 applies in relation to demutualisations occurring on or after 1 July 2008. If: (a) any assets held by the benefit funds of a life insurance company that is a friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a complying superannuation fund; and (b) the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer; the transfer is disregarded for any purposes of the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936. (1) In working out the amount that a life insurance company can deduct, in respect of life insurance policies that are disability policies (other than continuous disability policies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income. (2) In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection (1) applies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company’s liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320‑85(4) of that Act. If: (2) If the life insurance company wishes to include a part of an approved asset in its virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑87(2) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society establishes a virtual PST in the 2000‑01 income year, the calculation of the transfer values of the company’s virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year. (1) Subsection (3) applies for the purposes of subparagraph (b)(i) of the definition of virtual PST life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 259 of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007. (2) Subsection (3) also applies for the purposes of subparagraph (b)(i) of the definition of complying superannuation/FHSA life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 47 of Schedule 7 to the First Home Saver Accounts (Consequential Amendments) Act 2008. (3) Treat an annuity as having been purchased out of a superannuation lump sum or an employment termination payment, if the annuity was purchased: (b) out of an eligible termination payment (within the meaning of the Income Tax Assessment Act 1997, as in force just before the commencement mentioned in subsection (1) of this section). (2) If the life insurance company wishes to include a part of an approved asset in its segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (a) a life insurance company had a liability before 1 July 2000 under a life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and (c) there is a transfer of the company’s assets to the segregated exempt assets to meet that liability or that part of the liability; (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑105(1) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320‑225 of the Income Tax Assessment Act 1997 in the 2000‑01 income year, the calculation of the transfer values of the company’s segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year. Section 322‑25 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Part VC of the Insurance Act 1973 after 17 October 2008. 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you > new Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force after the commencement of this section. > old Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. > STS taxpayer means an STS taxpayer within the meaning of Division 328 of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. #### 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years (1) This section applies for the purpose of working out whether you are a small business entity (other than because of subsection 328‑110(4) of the Income Tax Assessment Act 1997) for the 2007‑08 or 2008‑09 income year. (2) You work out your aggregated turnover for the 2005‑06 or 2006‑07 income year as if the amendments made by Schedule 1 to the Tax Laws Amendment (Small Business) Act 2007 had been in force in relation to that year. (a) your aggregated turnover for the 2005‑06 income year (worked out in accordance with subsection (2)) is $2 million or more; but (b) your STS group turnover for that year (worked out under Subdivision 328‑F of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section) is less than $2 million. (2) The following provisions apply as if you are a small business entity for the income year in which you are winding up the business: #### 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you (1) For the purpose of working out whether you are a small business entity for the 2007‑08, 2008‑09, 2009‑10 or 2010‑11 income year (each a relevant income year) for the purposes of a provision to which subsection (3) applies: (2) An entity (the first entity) controls a discretionary trust for a relevant income year if, for any of the 4 income years (a previous income year) before that year: (a) if the previous income year is before the 2007‑08 income year—the trustee of the trust made a distribution of $100,000 or more to the first entity, any of its affiliates, or the first entity and any of its affiliates; or (i) the trustee of the trust paid to, or applied for the benefit of, the first entity, any of the first entity’s affiliates, or the first entity and any of its affiliates, any of the income or capital of the trust; and (ii) the percentage (the control percentage) of the income or capital paid or applied is at least 40% of the total amount of income or capital paid or applied by the trustee for that year. (1) This section sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (2) This section also sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (3) Any ordinary income that, apart from paragraph 328‑105(1)(a) of the Income Tax Assessment Act 1997 (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have derived before the changeover year (while you were using the STS accounting method) and you have not included in your assessable income because you have not received it is included in your assessable income for the changeover year. (4) Any general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, that, apart from paragraph 328‑105(1)(b) of that Act (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have incurred before the changeover year (while you were using the STS accounting method) and that you have not deducted because you have not paid them can be deducted for the changeover year. (b) for any later income year for which you are a small business entity but only if you used the STS accounting method for the income year before that later year. > Note: Example: You are a small business entity for the 2007‑08 and 2008‑09 income years and you continue to use the STS accounting method for those years. You are not a small business entity for the 2009‑10 income year so you cannot continue to use the STS accounting method for that year. Because you cannot use the STS accounting method for the 2009‑10 income year, you will not be able to use it again for a later income year even if you are a small business entity for that later year. In sections 328‑115 and 328‑120, STS accounting method means the accounting method that was required by the Income Tax Assessment Act 1997 to be used by STS taxpayers for the 2004‑05 income year. (b) you made a choice under subsection 328‑175(3) of old Subdivision 328‑D in relation to a depreciating asset you use to carry on a primary production business and for which you could deduct amounts under Subdivision 40‑F or 40‑G of the Income Tax Assessment Act 1997. (2) In determining whether you can choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997 in an increased access year, disregard subsection 328‑175(10) of that Act. (3) In applying paragraph 328‑175(10)(b) of that Act for the purpose of determining whether you can choose to use that Subdivision in any income year after the increased access years, disregard: (4) Paragraph 328‑180(1)(b) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that paragraph to $1,000: (i) first used the asset, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (i) first used the asset, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (i) first used the asset, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, on or after 1 July 2023 and on or before 30 June 2026. (a) a reference in that paragraph to the end of the income year in which you start to use the asset, or have it installed ready for use, for a taxable purpose were a reference to the earlier of: if: (i) first used the asset, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021. (5) Paragraph 328‑180(2)(a) or (3)(a) of the Income Tax Assessment Act 1997 applies to an amount included in the second element of the cost of an asset as if a reference in that paragraph to $1,000: (5A) For the purposes of determining whether, under subsection 328‑180(2) of the Income Tax Assessment Act 1997, you can deduct, for an income year (the current year), the taxable purpose proportion of an amount included in the second element of the cost of an asset, disregard paragraph (b) of that subsection if: (2) For the purposes of determining whether subsection 328‑180(1) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (b) of that subsection (which sets a limit of $1,000 on the cost of the asset) if, in the period beginning at the 2020 budget time and ending on 30 June 2023, you: (3) For the purposes of determining whether subsection 328‑180(2) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (a) of that subsection (which sets a limit of $1,000 on the amount) if the amount is included in the second element of the cost of the asset at any time in the period beginning at the 2020 budget time and ending on 30 June 2023. (4) In applying paragraph 328‑180(3)(a) of the Income Tax Assessment Act 1997 to an asset, disregard an amount included in the second element of the cost of the asset if the amount is deducted under subsection 328‑180(2) of that Act, as modified by subsection (3) of this section. (5) Section 328‑210 of the Income Tax Assessment Act 1997 applies as if the words “less than $1,000 but” in subsection (1) were disregarded, in relation to a deduction for an income year that ends: Subsection 328‑190(2) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that subsection to 15% were a reference to 57.5% if you are covered by section 40‑125 for the asset (which is about backing business investment). (1) A depreciating asset of yours that had been allocated to your general STS pool is treated as being allocated to your general small business pool. (2) A depreciating asset of yours that had been allocated to your long life STS pool is treated as being allocated to your long life small business pool. (3) If you made a choice, under subsection 328‑185(5) of old Subdivision 328‑D, not to have a depreciating asset allocated to your long life STS pool, the choice has effect for the purposes of subsection 328‑185(5) of new Subdivision 328‑D. (1) This section applies if a depreciating asset of yours is treated as being allocated to your general small business pool or long life small business pool under section 328‑185. (2) The opening pool balance of your general small business pool or long life small business pool for the 2007‑08 income year is taken to be the closing pool balance of your general STS pool or long life STS pool, as the case requires, for the 2006‑07 income year, reduced or increased by any adjustment required under section 328‑225 of new Subdivision 328‑D (about change in the business use of an asset). (a) you were not an STS taxpayer for the 2006‑07 income year (because you stopped being an STS taxpayer before that time); but (b) you are a small business entity for the 2007‑08 income year or a later income year and you choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets for that income year; the opening pool balance of your general small business pool or long life small business pool includes the sum of the taxable purpose proportions of the adjustable values of depreciating assets allocated to the pool under subsection 328‑185(3) of new Subdivision 328‑D for that year. (1) This section applies for the purposes of applying Subdivision 328‑D of the Income Tax Assessment Act 1997 for the 2012‑13 income year and later income years. (2) A depreciating asset that had been allocated to your long life small business pool is treated as being allocated to your general small business pool. (a) the closing pool balance of your general small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under section 328‑225 of that Act; and (b) the closing pool balance of your long life small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under that section. (1) This section applies if you chose to stop being an STS taxpayer for the 2005‑06 income year or the 2006‑07 income year. (2) You cannot choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets until at least 5 years after the income year for which you chose to stop being an STS taxpayer. > Note: Subdivision 328‑D of the Income Tax Assessment Act 1997 continues to apply to depreciating assets that have been allocated to your small business pools even if you are not a small business entity, or do not choose to use that Subdivision, for an income year: see section 328‑220 of that Subdivision. (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct 20% of particular expenditure for your 2023‑24 income year if: (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (d) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑450 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (6) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (ii) if the provider is a registered body of a kind listed in paragraph (2)(b), (c) or (d)—the training is within the provider’s scope of registration for that kind of registered body; and (d) each enrolment, or arrangement, for the provision of the training is made or entered into at or after 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022; and > Note: Paragraphs (b) and (c) mean this section will not apply to expenditure for on‑the‑job training or training provided by you in house. (a) a registered higher education provider (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); (b) a NVR registered training organisation (within the meaning of the National Vocational Education and Training Regulator Act 2011); (c) a registered education and training organisation (within the meaning of the Education and Training Reform Act 2006 (Vic.)); (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct for your 2023‑24 income year an amount that is equal to the sum of: (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (3) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑460 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (4) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (b) you incur the expenditure in the period starting at 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022 and ending at the end of: (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (4) For the purposes of paragraphs (1)(c) and (2)(c), in working out whether you can deduct an amount of expenditure on a depreciating asset, assume that: (b) throughout that effective life, you will use the asset for a taxable purpose to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose. (a) 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑470(1) or (3) applies in relation to the income year; and > Note: The deduction relates to the period of 1 July 2023 to 30 June 2024. An entity may have deducted an amount under paragraph (a) for a previous income year if the entity has a substituted accounting period. (2) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑470 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (3) Sections 8‑10, 40‑215 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (c) you start to use the asset, or have it installed ready for use, for any purpose after 30 June 2023 but before 1 July 2024; and (d) you start to use the asset, or have it installed ready for use, for a taxable purpose at a time (the start time) that is: (e) you are a small business entity, or an entity covered by subsection (4), for the income year that includes the start time; and (h) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) a new reasonably comparable depreciating asset that uses a fossil fuel (other than a use of which that is merely incidental) is available in the market at the start time; (ii) if the asset is being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than the other asset; (iii) if the asset is not being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than a new reasonably comparable depreciating asset that is available in the market at the start time; or (i) a depreciating asset (other than an asset excluded under subsection (6)) that uses electricity, or energy that is generated from a renewable source, to be more energy efficient; (iv) the use of electricity, or energy that is generated from a renewable source, by another depreciating asset to be monitored. (a) the amount is included in the second element of a depreciating asset’s cost under paragraph 40‑190(2)(a) of the Income Tax Assessment Act 1997; and (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (d) you are a small business entity, or an entity covered by subsection (4), for the income year in which the expenditure is incurred; and (i) if the asset could use a fossil fuel (other than a use of which that is merely incidental)—the asset to only use electricity, or energy that is generated from a renewable source; (ii) if the asset uses electricity, or energy that is generated from a renewable source—the asset to be more energy efficient; (g) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) For the purposes of paragraph (1)(b) or (3)(b), in working out whether you can deduct an amount of expenditure assume that: (i) for the purposes of paragraph (1)(b)—to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose; or (ii) for the purposes of paragraph (3)(b)—to the same extent as you use it for a taxable purpose in the income year in which the expenditure is incurred. (b) expenditure (other than expenditure referred to in subparagraph (3)(e)(i)) on an asset that can use a fossil fuel (other than a use of which that is merely incidental); (c) an asset that solely or predominantly generates electricity from a renewable source (for example, photovoltaic cells) or expenditure on such an asset; (d) an asset, or expenditure, being capital works for which you can deduct an amount under Division 43 of the Income Tax Assessment Act 1997; > Note: Subsections (1) and (3) also do not apply to an item of trading stock because such an asset is not a depreciating asset: see section 40‑30 of the Income Tax Assessment Act 1997. A reference in each of the following provisions of the Income Tax Assessment Act 1997 to a registration under section 27A of the Industry Research and Development Act 1986 includes a reference to a registration under former section 39J of that Act: (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) the R&D entity cannot deduct an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from: (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D entity could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:22pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the R&D entity is taken to be able to deduct under subsection 355‑315(2) of the new Act that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the R&D entity’s assessable income for the event year under subsection 355‑315(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 for the asset, the R&D entity is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑446 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the R&D entity is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑465 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: Section 355‑315 of the new Act would otherwise apply for the event in a case where the R&D entity had new law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by an R&D partnership; and (i) the partner can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the partner chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D partnership could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the partner is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:21.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D entity</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D partnership</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the partner is taken to be able to deduct under subsection 355‑525(2) of the new Act the partner’s proportion of that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the partner’s assessable income for the event year under subsection 355‑525(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partner’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if one or more partners (including the partner) in the R&D partnership is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset, the partner is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑448 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the partner is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑467 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s deductions under section 355‑520 of the new Act mentioned in subsection (4A) of this section. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the partner for the event, do so apply to the partner for the event. > Note 1: Section 355‑525 of the new Act would otherwise apply for the event in a case where the partner had new law deductions. Item 7 of the table in subsection 57‑110(2) in Schedule 2D to the Income Tax Assessment Act 1936 applies as if the deduction rules set out in the final column of that item also included former sections 73BA and 73BH of the Income Tax Assessment Act 1936. For the purposes of step 1 of the method statement in subsection 355‑415(2) of the Income Tax Assessment Act 1997, also disregard amounts that have already been taken into account under former subsection 73B(14AA) of the Income Tax Assessment Act 1936 for the R&D entity, the grouped entity and the R&D activities for an earlier income year. (1) This section applies if, apart from former paragraph 73B(10)(a) of the Income Tax Assessment Act 1936, an eligible company could deduct advance R and D expenditure in one or more income years commencing on or after 1 July 2011. > Note: That deduction would be under former section 73B of that Act as that former section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (a) apart from Subdivision H (prepaid expenditure) of Division 3 of Part III of the Income Tax Assessment Act 1936, an eligible company can deduct an amount under former section 73B, 73BA, 73BH, 73QA, 73QB or 73Y of that Act for an income year commencing before 1 July 2011; and (c) apart from former paragraph 73B(10)(a) of that Act, the eligible company could deduct an amount, as a result of that application of that Subdivision, for an income year commencing on or after 1 July 2011. > Note: That deduction would be under that Act as it applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (3) Former paragraph 73B(10)(a) of that Act is taken to apply to those income years commencing on or after 1 July 2011 as if the reference in that former paragraph to section 39J of the Industry Research and Development Act 1986 were a reference to section 27A of that Act. (4) An expression used in this section that is also used in former section 73B of the Income Tax Assessment Act 1936 has the same meaning in this section as it has in that former section. This Subdivision applies to core technology (within the meaning of former section 73B of the Income Tax Assessment Act 1936) if: (a) you incurred core technology expenditure (within the meaning of that former section) in an income year commencing before 1 July 2011 in relation to the core technology under one or more contracts entered into at or after the time referred to in former subsection 73B(12) of that Act; and (b) that expenditure (the undeducted expenditure) cannot be deducted for the last income year commencing before 1 July 2011. (1) This section applies for the purposes of Division 40 of the Income Tax Assessment Act 1997, other than sections 40‑292 and 40‑293 of that Act, if the core technology (the asset) is a depreciating asset. (2) Disregard this section, including its effect on the amount you can deduct under section 40‑25 of that Act for the asset, for the purposes of working out: (3) The asset’s opening adjustable value for the first income year that commences on or after 1 July 2011 (the first new income year) is equal to the amount of the undeducted expenditure. (4) Subsection 40‑75(2) of the Income Tax Assessment Act 1997 applies to the asset as if the first new income year were a change year (within the meaning of that subsection). If the core technology is not a depreciating asset, you can deduct the undeducted expenditure in equal proportions over a period of 5 income years starting in the first income year commencing on or after 1 July 2011. To work out the film component (if any) of your tax loss for the 1997‑98 income year or a later income year, apply former section 375‑805 of the Income Tax Assessment Act 1997. If you incurred a film loss for the purposes of former section 79F (Film losses of 1989‑90 to 1996‑97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989‑90 to 1996‑97 income years, that film loss is the film component of your tax loss for that income year. (1) To work out your film loss (if any) for the purposes of the Income Tax Assessment Act 1997 for the 1989‑90 or a later income year, apply former section 375‑810 of that Act. (2) You can deduct in the 1997‑98 or a later income year your film loss for any of the 1989‑90 to 1996‑97 income years only to the extent that it has not already been deducted. (1) Division 392 of the Income Tax Assessment Act 1997 applies to assessments for the 1998‑99 income year and later income years. (a) it had applied to your assessment for each income year before the 1998‑99 income year for which Division 16 of Part III of the Income Tax Assessment Act 1936 applied in relation to your income; and (b) you had carried on a primary production business during each income year before the 1998‑99 income year when you carried on a business of primary production; and (c) for each income year before the 1998‑99 income year you had a basic taxable income equal to your taxable income for the income year for the purposes of Division 16 of Part III of the Income Tax Assessment Act 1936. > Note: Section 149A of the Income Tax Assessment Act 1936 identifies what your taxable income for an income year is for the purposes of Division 16 of Part III of that Act. Division 392 of the Income Tax Assessment Act 1997 does not apply to your assessment for the 1998‑99 income year or a later income year if you made an election under section 158A (Election that Division not apply) of the Income Tax Assessment Act 1936 relating to an income year before the 1998‑99 income year. 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 A reference in Division 393 of the Income Tax Assessment Act 1997 to a deduction under section 393‑5 of that Act for making a farm management deposit is taken to include a reference to a deduction under section 393‑10 in Schedule 2G to the Income Tax Assessment Act 1936, as in force just before the commencement of this section, if the deposit was made before the 2010‑11 income year. #### 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 (b) the deposit was made with an FMD provider as a result of a request to which section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, applied; the unrecouped FMD deduction in respect of the deposit at that time is equal to the amount of the unrecouped deduction (within the meaning of the former subsection 159GA(3) of the Income Tax Assessment Act 1936) in respect of the deposit immediately before it ceased to be a deposit under the Loan (Income Equalization Deposits) Act 1976. > Note: This means that the unrecouped deduction relating to the deposit under the Loan (Income Equalization Deposits) Act 1976 continues to apply (by becoming an unrecouped FMD deduction) when the deposit is transferred to an FMD provider as a farm management deposit. The Loan (Income Equalization Deposits) Act 1976 was repealed on 22 February 2005. If a beneficiary of a trust was covered by paragraph (c) of the definition of primary producer in section 393‑25 in Schedule 2G to the Income Tax Assessment Act 1936 in the 2009‑10 income year, treat subsection 393‑25(3) of the Income Tax Assessment Act 1997 as having applied to the beneficiary for the purpose of determining the maximum number of choices that the trustee may make under subsection 393‑27(2) of that Act for the 2010‑11 income year. (a) a farm management deposit of an owner was unclaimed moneys for the purposes of section 69 of the Banking Act 1959; and (2) For the purpose of subsection 393‑10(1) of the Income Tax Assessment Act, treat the repaid unclaimed moneys as a repayment of the deposit of the owner. (3) To avoid doubt, the payment of unclaimed moneys to the Commonwealth under section 69 of the Banking Act 1959 is not a repayment of the deposit of the owner for the purposes of Division 393 of the Income Tax Assessment Act 1997. 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 #### 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 If a farm management deposit was made with an FMD provider as a result of a request under section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, then: (a) subsections 393‑40(1) to (4) of the Income Tax Assessment Act 1997 apply as if the day the deposit was made was the day on which the deposit was originally made under the Loan (Income Equalization Deposits) Act 1976; and (1) A copyright collecting society to which section 51‑43 of the Income Tax Assessment Act 1997 applies, may elect that, from 1 July 2004, the section apply to all ordinary income, and statutory income, collected or derived by the society on or after 1 July 2004. Division 420 of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division. Subdivision 615‑C of the Income Tax Assessment Act 1997 applies to you with the modifications set out in this Subdivision if you chose to obtain a roll‑over involving \*shares or units that: (b) were your trading stock, or revenue assets, at the time immediately before that disposal, redemption or cancellation. (1) Disregard subparagraph 615‑45(a)(ii), and paragraph 615‑45(b), of the Income Tax Assessment Act 1997 if the roll‑over relates to \*shares that were disposed of, redeemed or cancelled. (2) For each of the \*shares in the interposed company that you acquired in return for those of your shares or units in the original entity that were your \*trading stock at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  (2) For the purpose of calculating any profit or loss on a future disposal, cessation of ownership, or other realisation of a \*share in the interposed company that you acquired in return for those of your shares or units in the original entity that were \*revenue assets at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  Subdivision 620‑A of the Income Tax Assessment Act 1997 applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. (1) Part 3‑90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Act (No. 1) 2002 and amended by: (2) Section 713‑50 of the Income Tax Assessment Act 1997 (about factors to consider in determining destination of distribution by non‑fixed trust) applies for the purposes of this Part in the same way as it applies for the purposes of Part 3‑90 of that Act. ### Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly‑owned subsidiary of the entity (the future head company) that became the head company of the group; or (ii) at some time during that period, the entity was a wholly‑owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (ii) it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (1) If a group is a transitional group, its head company may, subject to subsection (3), choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (3) If the choice is to be made after the end of the period mentioned in paragraph (2)(a) and before the end of the day mentioned in paragraph (2)(b), it cannot be made unless each entity in relation to which the conditions in subsection (5) are satisfied has agreed to it being made. (a) the entity (the leaving entity) ceased to be a subsidiary member of the group before the choice was made (in a subsection (3) case) or before the revocation took place (in a subsection (4) case); and (b) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; and (c) the asset had become that of the head company because that section applied when a chosen transitional entity (whether or not the same entity as the leaving entity) became a subsidiary member. Section 716‑855 applies for the purposes of this Division in the same way as that section applies for the purposes of Part 3‑90 of the Income Tax Assessment Act 1997. is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705‑B of that Act and with this Division. 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity Section 701‑10 (cost to head company of assets of joining entity) and subsection 701‑35(4) (setting value of trading stock at tax‑neutral amount) of the Income Tax Assessment Act 1997 do not apply to the assets of a chosen transitional entity. > Note: The fact that the head company inherits the entity’s history under section 701‑5 of that Act when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time. #### 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities (2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non‑chosen subsidiary) is worked out in a special way. (b) for each sub‑group (see subsection (6)) that exists in relation to the non‑chosen subsidiary—the sub‑group’s notional allocable cost amount (see subsection(5)) for the non‑chosen subsidiary. (4) The head company adjusted allocable amount for the non‑chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if; (b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of head company’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub‑group in relation to the non‑chosen subsidiary. (5) For each sub‑group that exists in relation to the non‑chosen subsidiary, there is a sub‑group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non‑chosen subsidiary if: (a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non‑chosen subsidiary and the entities comprising the sub‑group; and (c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub‑group membership interests (see subsection (6)) in relation to the sub‑group, and any such entity held those membership interests during the period when it actually held them; and (d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of chosen transitional entity’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub‑group. (6) If a chosen transitional entity holds membership interests in a non‑chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non‑chosen subsidiary: (a) the chosen transitional entity and each interposed non‑chosen subsidiary comprise a sub‑group in relation to the non‑chosen subsidiary (unless the non‑chosen subsidiary is included in a sub‑group in relation to another non‑chosen subsidiary); and (i) the membership interests that the chosen transitional entity holds directly in the non‑chosen subsidiary or in any of the interposed non‑chosen subsidiaries; (ii) the membership interests that each interposed non‑chosen subsidiary holds directly in the non‑chosen subsidiary or in any of the other interposed non‑chosen subsidiaries. #### 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities If any provision of the Income Tax Assessment Act 1997 would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply. > Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred. (1) This section has effect for the purposes of applying section 705‑70 (step 2 of allocable cost amount) of the Income Tax Assessment Act 1997 in relation to a transitional entity. (2) In spite of subsection 705‑70(1A) of that Act, if the amount of an accounting liability of the transitional entity would be different when it becomes an accounting liability of the transitional group, that difference is not taken into account in working out the amount of the liability. #### 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different (a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset (the roll‑over asset) for which there was: (ii) roll‑over relief under section 40‑340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and (i) became an asset of the head company when the transitional group came into existence because subsection 701‑1(1) (the single entity rule) of that Act applies; or differs at that time from what it would have been if the act, transaction or event that gave rise to the CGT event had not occurred in relation to the roll‑over asset; then the provisions mentioned in subsection (2) apply as if the act, transaction or event had not occurred in relation to the roll‑over asset. (a) the act, transaction or event mentioned in subsection (1) happened before a demerger and in connection with the demerger; and (b) before the transitional group came into existence, at least one of the following entities ceased to be a member of the demerger group because of the demerger: (i) the originating company in relation to the roll‑over, or the transferor in relation to the roll‑over relief, was a foreign resident; and (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as a transitional foreign‑held subsidiary of the group. #### 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets (1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied. (2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset. (a) the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and (b) former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset. (4) The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group. (6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses. #### 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets (b) just before the transitional group came into existence, the entity that became the head company held a pre‑CGT asset; and (d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre‑CGT asset and is held by the head company only because the entity is taken by subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company. (2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence. #### 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity (1) This section provides for an addition to the step 1 amount for working out under section 711‑20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity) that ceases to be a subsidiary member of the transitional group at a time (the leaving time), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701‑1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount for paragraph</span><span> </span><span>(2)(c)</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">If, because of the circumstances described in paragraphs</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(a) and (b):</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">The amount is:</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:180.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following provisions applied to the entity:</span></p><p class="Tablea"><span>(a) former section</span><span> </span><span>61A of the </span><span style="font-style:italic">Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(b) former Subdivision</span><span> </span><span>57</span><span>‑</span><span>I in Schedule</span><span> </span><span>2D to the</span><span style="font-style:italic"> Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(c) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(4) of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td><td style="width:148.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the amount treated as being the cost of the asset under that provision; and</span></p><p class="Tablea"><span>(b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>2</span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following subsections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span><span> applied to the entity:</span></p><p class="Tablea"><span>(a) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(5);</span></p><p class="Tablea"><span>(b) 58</span><span>‑</span><span>70(3)</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The amount treated as being the cost, or the first element of the cost, of the asset under that subsection</span></p></td></tr></tbody></table> ``` (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997, as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="4" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amounts and provisions for different dates of acquisition</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Date of the acquisition</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Amount</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Provision of Division</span><span style="font-weight:bold"> </span><span style="font-weight:bold">58 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> applying to the acquisition and the working out of the amount</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:76.7pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>160</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>220</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>After 30</span><span> </span><span>June 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>First element of the cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subsection</span><span> </span><span>58</span><span>‑</span><span>70(5)</span></p></td></tr></tbody></table> ``` > Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. > Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and ### Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: #### 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70‑45 to 70‑70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420‑51 to 420‑58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (a) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority‑owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority‑owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority‑owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority‑owned entity became a subsidiary member of the group, there was roll‑over relief under section 40‑340 of the Income Tax Assessment Act 1997. (a) while the asset is, because subsection 701‑1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, its tax cost setting amount is taken to be equal to the continuing majority‑owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711‑30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997. (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset becomes that of an entity (a new asset holder) other than the head company because subsection 701‑1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder) acquiring some or all of the membership interests in the new asset holder; and (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset is acquired by another entity (a new asset holder) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll‑over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value asset just before the acquisition; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 #### 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 (b) members of the consolidated group or the MEC group mentioned in subsection 104‑500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701‑1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701‑1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (3) If this section applies, neither subsection 104‑500(4) nor subsection 104‑500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year. ### Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C‑B); and (b) modifies certain rules in Part 3‑90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C‑C). > Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719‑2 and 719‑10 of this Act). 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership #### 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(ii) of that Act (see subsection 719‑2(3) of this Act). (b) a trust (a non‑resident trust) that does not meet the requirements in any item of the table in section 703‑25 of the Income Tax Assessment Act 1997. (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non‑resident company or a non‑resident trust; or Test entity must be a subsidiary member on assumption that non‑resident companies and non‑resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non‑resident company or non‑resident trust were a subsidiary member of the group. (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv). #### 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(iii) of that Act (see subsection 719‑2(3) of this Act). (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C‑10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3). If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C‑10 are met; and (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (ii) an entity that is a transitional foreign‑held indirect subsidiary of the group because of another application of this paragraph; Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign‑held indirect subsidiary would need to have satisfied the set of requirements in either section 701C‑10 or 701C‑15 (1) This Subdivision applies if an entity (the transitional foreign‑held joining entity) that is a transitional foreign‑held subsidiary or a transitional foreign‑held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time) the group comes into existence. (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign‑held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign‑held indirect subsidiary that becomes a subsidiary member at that time takes account of this. (a) section 701‑10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); apply, for the purposes of setting the tax cost of an asset of the transitional foreign‑held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign‑held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. > Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign‑held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign‑held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign‑held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign‑held subsidiary and the other entity. > Note 2: If the transitional foreign‑held joining entity is a transitional foreign‑held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705‑A of the Income Tax Assessment Act 1997, in its application in accordance with Subdivision 705‑B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company. Subsection 701‑35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax‑neutral amount) does not apply to the assets of the transitional foreign‑held joining entity if it is a transitional foreign‑held subsidiary. Section 701‑15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: (a) this section applies to each membership interest in the transitional foreign‑held subsidiary that is held by an entity (an eligible non‑resident) of a kind mentioned in subparagraph 701C‑20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign‑held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701‑1(2) of the Income Tax Assessment Act 1997 applies to the eligible non‑resident in the same way as it applies to the head company. Section 711‑5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: > Note: If the leaving entity is a transitional foreign‑held subsidiary (within the meaning of section 701C‑20 of the Income Tax (Transitional Provisions) Act 1997), this Division will, in accordance with subsection 701‑15(4) of this Act (see section 701C‑40 of the first‑mentioned Act), apply to membership interests that an eligible non‑resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity. (1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707‑C of the Income Tax Assessment Act 1997. (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period. (1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if: (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (d) the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997. (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: (1) The head company of a consolidated group may make a choice in the approved form to apply section 701D‑10 to another entity. (2) However, the head company cannot make that choice if subsection 701D‑10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (a) an asset of the head company because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701‑55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40‑77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40‑77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40‑285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount. (b) after the asset became an asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). > Note: The final entity will be different from the head company if an entity (the leaving entity) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40‑285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. > Note: The final entity will be entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701‑5 (the entry history rule) of that Act and perhaps also section 701‑40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity) became a subsidiary member of the group; and It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). > Note: In some cases, section 705‑47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40‑285(3) of this Act. If: (b) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and subsection 40‑285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701‑10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997. > Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997. (1) For the purposes of Part 3‑90 of the Income Tax Assessment Act 1997, this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960‑G of that Act whether the interest or right is a membership interest of the entity in the other entity. > Note: Under Subdivision 960‑G of the Income Tax Assessment Act 1997, a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001) apply to transactions in relation to the interest or right at the relevant time. Despite the amendments of section 703‑35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) If an entity (the joining entity) to which section 40‑75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time), this Subdivision applies in relation to: (ii) became assets of the head company of the group at the joining time because of section 701‑1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure. (1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). (2) If the joining entity could not deduct an amount under Subdivision 40‑B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701‑55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40‑35, 40‑37, 40‑40 or 40‑43 treated the joining entity as holding a notional asset. > Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705‑30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. (a) deductions under former Subdivision 330‑A, 330‑C or 330‑H of the Income Tax Assessment Act 1997, or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated an entity as holding because of the expenditure. (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); > Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40‑75(4) of this Act, but may have been reset since under Subdivision 40‑B of the Income Tax Assessment Act 1997. > Note 2: The effective life of a notional asset is specified by whichever one of sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act is relevant to the notional asset. (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (9) Section 705‑55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705‑45 of that Act. > Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705‑40 of the Income Tax Assessment Act 1997. (a) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701‑5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. > Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705‑305(3). (ii) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707‑A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member. 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value #### 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707‑320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor) other than the real loss‑maker mentioned in subsection 707‑315(1) of that Act for the bundle; and (b) both the real loss‑maker and the value donor became members of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (ca) neither the real loss‑maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (ii) a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (ii) section 713‑540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (2) It must have been possible for the real loss‑maker to have transferred the loss to the value donor under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss‑maker at the initial transfer time the amount worked out using the formula:  > Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707‑327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss‑maker to the transferee. > total of real loss‑maker’s non‑foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss‑makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) included in a bundle of losses: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. #### 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value (1) This section affects the calculation of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707‑325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936, in the bundle). > Note: This section does not affect the calculation of the real loss‑maker’s modified market value for other purposes (such as the real loss‑maker being a value donor for the purposes of another application of section 707‑325 of this Act). (3) One condition is that the event was an injection of capital directly into the real loss‑maker by the value donor mentioned in section 707‑325 of this Act. (c) that would have caused subsection 707‑325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss‑maker’s modified market value (even if no other events described in subsection 707‑325(4) of that Act had occurred), apart from this section. (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss‑maker (whether or not the event also involved either the value donor or the real loss‑maker); or (1) This section has effect for the purposes of working out under Subdivision 707‑C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707‑325, as if there were added to the modified market value of the real loss‑maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (c) the loss is not a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707‑A of that Act at the initial transfer time had the company: > Note: This section has effect even if the amount added to the real loss‑maker’s modified market value under section 707‑325 is nil because the value donor’s modified market value is nil. (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707‑325, as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (4) If the transferee mentioned in subsection 707‑325(1) chooses, sections 707‑310, 707‑335 (except paragraph 707‑335(2)(a)) and 707‑340 of the Income Tax Assessment Act 1997 (and subsections 707‑315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: > Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707‑325(1)(d) and (e) and subsection 707‑325(2) in an application of section 707‑325 separate from the application of that section mentioned in paragraph (1)(a) of this section. > Note: This means that a loss that provided a basis for section 707‑325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. (b) in connection with the requirement that it must have been possible for a company (the notional transferor) to transfer to another company (the notional transferee) for an income year a loss under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997. (b) ends immediately after the initial transfer time mentioned in subsection 707‑320(1) of the Income Tax Assessment Act 1997. > Note: For the purposes of identifying the trial year using the definition in section 707‑120 of the Income Tax Assessment Act 1997, the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time. (1) Subsection (3) of this section affects the calculation, under section 707‑325 of the Income Tax Assessment Act 1997 and section 707‑325 of this Act, of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (the formation time) the group became a consolidated group; and (b) the provisions described in subsection 707‑327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707‑327(1)(b) and (c) of this Act as if the bundle included the loss; and (d) subsection 707‑325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707‑325(1) of this Act chooses that this section apply in relation to the real loss‑maker. (2) Section 707‑325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. (3) Disregard for the purposes of subsection 707‑325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707‑325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or > Note: Disregarding such an event could have a direct or indirect effect on the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss‑maker’s modified market value calculated under section 707‑325 of the Income Tax Assessment Act 1997, if the real loss‑maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707‑325 of this Act to add an amount to the real loss‑maker’s modified market value for those purposes. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) that: (b) was transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from an entity other than the real loss‑maker. (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997. Disregard an event that is described in subsection 707‑325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707‑325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004. (1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss‑maker) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time) the transferee became the head company of a consolidated group; and (ii) the conditions in one or more of paragraphs 165‑15(1)(a), (b) and (c) did not exist in relation to the real loss‑maker; and (da) the real loss‑maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non‑transferred losses) of the same sort that the transferee made without a transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non‑transferred losses). (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. <table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Limit on utilising the losses</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For this income year:</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the losses that the transferee may utilise cannot exceed:</span></p></td></tr></thead><tbody><tr><td style="width:20.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:120.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The first income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span style="font-size:8pt; vertical-align:2pt">1</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The second income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) </span><span style="font-size:8pt; vertical-align:2pt">2</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the amount of the losses utilised for the income year mentioned in item</span><span> </span><span>1</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The third income year ending after the initial transfer time, or a later income year</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time</span></p></td></tr></tbody></table> ``` (4) Subdivision 707‑C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707‑A of that Act. > Note: This has 2 effects. First, Subdivision 707‑C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707‑A of that Act). (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). (7) This section does not limit the transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company. In working out when a choice may be made under subsection 707‑325(5), 707‑327(5), 707‑328A(4) or 707‑350(5), ignore losses to which section 713‑535 of the Income Tax Assessment Act 1997 applies. > Note: That section deals with losses transferred under Subdivision 707‑A of that Act from certain wholly‑owned subsidiaries of life insurance companies that are members of a consolidated group. Section 707‑405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act. (1) This section reduces the adjustable value of a notional asset that section 40‑35, 40‑37, 40‑38, 40‑40 or 40‑43 treats the head company of a consolidated group as holding, if: (b) that section treats the leaving entity as holding a notional asset because of section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997. > Note: Section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time. The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences. (1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event) happening involving an entity (the originating entity) and another entity (the recipient entity) if: (a) the event occurs in connection with a life insurance company (the member life insurance company) becoming a member of a consolidated group; and (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest) in a company or in another trust. (a) a life insurance company transfers an asset (also the original asset) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320‑200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset) to its segregated exempt assets where, apart from this Subdivision, section 320‑255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event) is made in connection with the life insurance company (also the member life insurance company) becoming a member of a consolidated group. (1) This Subdivision applies only if the originating entity (for a section 713‑505 case) or the life insurance company (for a section 713‑510 case) chooses that it apply. (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713‑510 of the Income Tax Assessment Act 1997; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713‑510 of the Income Tax Assessment Act 1997; and (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs. This Act, and the Income Tax Assessment Act 1997, apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group. (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain) that the originating entity would have made as a result of the deferral event is disregarded; and (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount) under paragraph 320‑15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (1) This section operates if, after the deferral event happens, another event (the new event) happens where the new event is: (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (i) the original asset being transferred to or from the company’s virtual PST under section 320‑180, 320‑185 or 320‑195 of the Income Tax Assessment Act 1997; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320‑235, 320‑240 or 320‑250 of that Act; or (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. > Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713‑505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (1) For a section 713‑505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713‑535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: (a) an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group at a time (the leaving time); and (b) but for the cessation of membership and section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision. Sections 716‑340 and 716‑345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. <table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:345.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Extended operation of sections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 1</span><br><span style="font-weight:bold">Sections</span><span style="font-weight:bold"> </span><span style="font-weight:bold">716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">340 and 716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">345 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> operate in relation to:</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 2</span><br><span style="font-weight:bold">In the same way as they operate in relation to:</span></p></td></tr></thead><tbody><tr><td style="width:5.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:161.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>46</span><span>‑</span><span>90 of that Act</span></p></td><td style="width:156.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>40</span><span>‑</span><span>455 of that Act</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software pool created under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure allocated to a software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Software, expenditure on which was in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>In</span><span>‑</span><span>house software, expenditure on the development of which is allocated to a software development pool</span></p></td></tr></tbody></table> ``` (1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: Section 703‑30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004. (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time) a wholly‑owned subsidiary of the entity that became the head company of the group (the head entity), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier‑1 company of the group at the formation time. Despite the amendment of section 719‑30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) Section 719‑160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719‑160(3) of the Income Tax Assessment Act 1997. (3) However, that effect of section 719‑160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division. (2) Paragraphs 701‑1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier‑1 company at the time the MEC group came into existence. (a) the entity and one or more other entities were members of a potential MEC group as eligible tier‑1 companies, throughout the period: (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier‑1 company, at the time the transitional group came into existence. To avoid doubt, sections 707‑325 and 707‑327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719‑305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707‑A of that Act. Subsection 719‑325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006. (1) A reference in an agreement to item 25 of the table in subsection 721‑10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: (1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: Division 725 applies to a scheme entered into on or after 1 July 2002. It also applies to a scheme entered into on or after 27 June 2002, but only if: ### Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (1) Division 727, as inserted by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 and amended by the New Business Tax System (Consolidation and Other Measures) Act 2003, applies to a scheme entered into on or after 1 July 2002. (b) a presumed indirect value shift that happens under the scheme and affects a realisation event that happens on or after 1 July 2002. (a) the economic benefits taken into account in determining that the scheme has resulted in that indirect value shift or presumed indirect value shift include economic benefits provided by: > Note: In that case, the consequences of the trigger event are worked out under Division 138 or 139 of the Income Tax Assessment Act 1997: see items 13 and 14 of Schedule 15 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002. (1) An indirect value shift does not have consequences under Division 727 of the Income Tax Assessment Act 1997 if, to the extent of at least 95% of their total market value, the greater benefits consist entirely of: (a) a right to have services that are covered by section 727‑240 of that Act provided directly by the losing entity to the gaining entity; or (d) if the losing entity’s 2002‑2003 income year ends before 30 June 2003—the start of the losing entity’s 2004‑2005 income year. (2) For the purposes of section 727‑850 (about a presumed indirect value shift affecting a realisation event) of the Income Tax Assessment Act 1997, subsection (1) of this section applies to the presumed indirect value shift: #### 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (2) Paragraph 727‑470(2)(a) of the Income Tax Assessment Act 1997 (as in force immediately before the commencement of this section) continues to have effect in relation to the indirect value shift as if the repeals and amendments made by Schedule 1, Parts 1 and 2 of Schedule 3 and Schedule 8 to the Tax Laws Amendment (Small Business) Act 2007 had not been made. ## Division 61 Generally applicable tax offsets ## Subdivision 61 ‑L—Tax offset for Medicare levy surcharge (lump sum payments in arrears) ## 61‑575 Application of Subdivision 61‑L o 61‑575 Application of Subdivision 61‑L of the Income Tax Assessment Act 1997 Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years. ## Part 2 ‑25—Trading stock (a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and (2) Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001 (the new Act) applies to the plant on this basis: (a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant’s opening adjustable value; and (b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and (c) if you excluded an amount from your assessable income under section 42‑290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999—the cost of the plant, and its opening adjustable value, are reduced by that amount; and (d) if subparagraph (1)(b)(ii) applies to you—you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi‑owner of the plant under the former Act continue. (3) If you were using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis: (a) for the diminishing value method—replace the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate you were using; and (i) replace the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate you were using; and (ii) increase the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note 1: Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced. > Note 2: Small business entities can choose to work out the decline in value of their depreciating assets under Division 328. (a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or (3) If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40‑70(1) or 40‑75(1) of the new Act that includes the plant’s effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and (2) For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets. (3) For a case where the plant is merged into another depreciating asset, section 40‑125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it. (b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and (a) you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and (b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU’s opening adjustable value. (1) Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001. (2) For a unit of software for which you were deducting amounts under Subdivision 46‑B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis: (d) you must use the same effective life you were using under Subdivision 46‑B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001. (1) This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day. (b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and (c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and (1) This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001. > Note: Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8). (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330‑80 of the former Act for your income year ending on 30 June 2001; and (c) in applying the formula in section 40‑75 of the new Act for the income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The remaining effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these: (i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and (ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (7) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and (b) the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of expenditure incurred in carrying on eligible quarrying operations—the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (i) you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day) after 30 June 2001; or (ii) the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day) after 30 June 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which the start day occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year. there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (1) This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330‑H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and (c) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (i) any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset); (i) any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (4) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (4) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (b) the expenditure would have been transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330‑H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for your income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (1) Despite subsections 40‑35(5), 40‑38(5) and 40‑40(4), there is no additional decline in the value of the notional asset referred to in those subsections if: (a) apart from this section, subsection 40‑35(5), 40‑38(5) or 40‑40(4) would apply because the real asset referred to in that subsection is disposed of; and (a) at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373‑35 of the former Act; and (b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day. (a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and (1) Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time). (2) Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time. (a) you have deducted or can deduct an amount under Subdivision 387‑G of the former Act for an amount (the qualifying amount) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and (b) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and (1) This section applies to you if you have deducted or can deduct an amount under Subdivision 400‑A of the former Act for an amount (the qualifying amount) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400‑A of the former Act. (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and (c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400‑15(3) of the former Act; and (1) Units of plant that you had allocated to a pool under Subdivision 42‑L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act. (a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and (c) in applying the formula in section 40‑70 of the new Act for your income year in which 1 July 2001 occurs—it has a base value equal to that opening adjustable value; and (d) you replace the component in the formula in subsection 40‑70(1) of the new Act that includes an asset’s effective life with the pool percentage you were using for the pool; and (e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40‑115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and (f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset. (3) An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item). > Note 1: You work out the decline in value of an item removed under this subsection under Subdivision 40‑B of the new Act, using the cost for it worked out under section 40‑205 of the new Act. (b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset. (2) The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year) in this way: (a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and (b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section. (a) for a unit of plant (including IRUs and expenditure on software that is not pooled)—its undeducted cost at the end of 30 June 2001; or (b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence—the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or (c) for transport capital expenditure—the entity’s amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or (d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (e) for expenditure on evaluating the impact on the environment of a project—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (f) for assets that were pooled under Subdivision 42‑M or 42‑L of the former Act—the closing balance of the pool at the end of 30 June 2001. (4) The asset’s base value for applying the formula in section 40‑70 of the new Act for the diminishing value method is that opening adjustable value. (5) The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an item of plant for which you were using the prime cost method—using the rules in section 40‑10 of this Act; and (c) for a unit of software for which the entity was deducting amounts under Subdivision 46‑B of the former Act—using the rules in subsection 40‑25(2) of this Act; and (f) for an amount of expenditure on evaluating the impact on the environment of a project—using the rules in section 40‑55 of this Act. (6) The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an amount of unrecouped expenditure under Division 330 of the former Act—using the rules in section 40‑35 of this Act; and (b) for an amount of transport capital expenditure under Division 330 of the former Act—using the rules in section 40‑40 of this Act; and (7) The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act. (a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑C of the former Act; or (b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑H of the former Act; or (c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387‑B of the former Act; or (d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; or (e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365. (9) The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001. (10) You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount). (11) You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount. (1) Subsections 40‑65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened: (b) you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act. (a) paragraph 40‑65(6)(a) of the Income Tax Assessment Act 1997 included both events set out in subsection (1) of this section; and (b) subsections 40‑65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events. (1) A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936. (2) An amount you have deducted or can deduct for a water facility under Subdivision 387‑B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40‑F of the new Act. (3) A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936. (a) you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40‑115 (about splitting a depreciating asset) or 40‑125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and (b) it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40‑72 of that Act; (2) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if: (c) it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40‑72 of that Act. (3) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset) before 10 May 2006 if: (b) the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and (d) it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40‑72 of that Act. (a) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you: (b) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001. (2) If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act. (3) Otherwise, Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section. (a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or (b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or (ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life. (1) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001. > Note: If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40\. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997. (1A) Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001. (1B) Subsection (1) applies to a mining, quarrying or prospecting right (the new right) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if: (i) the other company is a member of the same wholly‑owned group as the original holder and was a member of that group just before that day; and (ii) the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer. (1D) Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if: (b) the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001. (a) you acquired, under an interest realignment arrangement, an interest (a new interest) in a mining, quarrying or prospecting right; and (b) the interest was acquired in exchange for one or more other interests (old interests) in other mining, quarrying or prospecting rights; and Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001. (a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or (b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership; the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act. (3) An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that: (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act. (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act. (6) Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243. (7) An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if: (a) you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and (8) The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section. (c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act. (2) Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001. A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act. if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011. (2) The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011. (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset for an income year is the amount worked out under section 40‑130 if: (a) the income year is the year in which you start to use the asset, or have it installed ready for use, for a taxable purpose; and (b) subsection (2) (about businesses with turnover less than $500 million) applies to you for the year and for the income year in which you started to hold the asset (if that was an earlier year); and > Note 1: An effect of paragraph (1)(a) is that this Subdivision only applies to one income year per asset. See also subsection 40‑135(1). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $500 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. Exception—assets for which the decline in value is worked out under section 40‑82 or Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (3) However, this section does not apply to a depreciating asset for an income year if you work out the decline in value of the asset for the income year under any of the following: (1) For the purposes of paragraph 40‑120(1)(c) and section 328‑182, you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you: > Note: Section 328‑182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997. (i) entering into a contract under which you hold the post‑12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑12 March 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post‑12 March 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (8) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (9) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (10) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (1) For the purposes of section 40‑120, the decline in value for the income year in which paragraph 40‑120(1)(a) is satisfied (the current year) is: > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 12 March 2020 to 30 June 2020 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2020 to 30 June 2021. (a) 50% of the asset’s cost as at the end of the current year, disregarding any amount included in the second element of the asset’s cost after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997, assuming its cost were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (3) However, the amount worked out under subsection (2) for an income year cannot be more than the amount that is the asset’s cost for the year. (a) 50% of the sum of the asset’s opening adjustable value for the current year and any amount included in the second element of its cost for that year, disregarding any amount included in that second element after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997 assuming: (ii) for the prime cost method—the component “Asset’s \*cost” in the formula in subsection 40‑75(1) of that Act (as adjusted under that section) were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (b) for the prime cost method—the sum of its opening adjustable value for the income year and any amount included in the second element of its cost for that year. (1) The decline in value of a depreciating asset is not worked out under this Subdivision for an income year if this Subdivision already applied in working out the decline in value of the asset for an income year. (2) For an income year later than the year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (3) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (4) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) You may choose that the decline in value of a particular depreciating asset for an income year, and subsequent income years, is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the first income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. If this Subdivision applies to work out the decline in value of a depreciating asset you hold for an income year, no other provision of this Act or the Income Tax Assessment Act 1997 applies to work out that decline in value. (1) For the purposes of this Subdivision, you are covered by this section for a depreciating asset if, on or before 30 June 2023: (2) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (3) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or Exception—assets for which the decline in value is worked out under Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (a) the asset is allocated to a low‑value pool, or expenditure on the asset is allocated to a software development pool (see Subdivision 40‑E of the Income Tax Assessment Act 1997); or (b) you or another taxpayer has deducted or can deduct amounts for the asset under Subdivision 40‑F of the Income Tax Assessment Act 1997 (about primary production depreciating assets). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $5 billion; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this section. (ii) if the 2019‑20 income year ends on or before 6 October 2020—the sum of your ordinary income (if any) and statutory income (if any) for the 2019‑20 income year; and (c) the sum of the amounts worked out under subsection (3) for the 2016‑17, 2017‑18 and 2018‑19 income years exceeds $100 million. (b) next, work out the cost of each of those assets (including any amounts included in the second element of the asset’s cost at a time that is in the income year); (4) For the purposes of subsection (3), disregard an asset if, at the time you first used the asset, or had it installed ready for use, for a taxable purpose: (a) it was not reasonable to conclude that you would use the asset principally in Australia for the principal purpose of carrying on a business; or (5) For the purposes of paragraph (3)(b), to work out the cost of a depreciating asset that is capital works (see section 43‑20 of the Income Tax Assessment Act 1997): (a) disregard section 40‑45 of that Act and work out the cost of the capital works using Subdivision 40‑C of that Act; and (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under subsection (3) if: (a) where section 40‑155 covers you for the current year (regardless whether section 40‑157 also covers you for the current year)—an exclusion applies to you and the asset for the current year under section 40‑165 (about exclusions for businesses with turnover of $50 million or more); or (ii) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s start time occurs in the current year—the asset’s cost as at the end of the current year, disregarding any amount included in the asset’s cost after 30 June 2023; or (b) if the asset’s start time occurred in an earlier year—the sum of its opening adjustable value for the current year and any amount included in the second element of its cost for the current year, disregarding any amount included in the asset’s cost after 30 June 2023. > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 6 October 2020 to 30 June 2021 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2021 to 30 June 2022. (a) where paragraph 40‑160(2)(a) applies—section 40‑155 would not cover you for the income year if the reference in that section to $5 billion were instead a reference to $50 million; and (i) entering into a contract under which you hold the post‑6 October 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑6 October 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of satisfying paragraph 40‑160(1)(a) for the post‑6 October 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you already satisfied paragraph 40‑160(1)(a) of this Act for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (9) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (1) For the purposes of subsections 40‑160(2) and 40‑170(1A), an exclusion applies to you and an asset for an income year if any of the exclusions in this section applies in relation to the asset. (4) This exclusion applies in relation to the asset if the asset is available for use, at any time in the income year, by any of the following: (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under this section if: (ii) you started to use the asset, or have it installed ready for use, for a taxable purpose in an earlier income year; and (b) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under section 40‑82 of the Income Tax Assessment Act 1997—the amount worked out under subsection (3); or (b) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under Subdivision 40‑BA of this Act—the amount worked out under subsection (4); or Assets affected by section 40‑82 of the Income Tax Assessment Act 1997 (about assets costing less than $150,000, medium sized businesses) (a) the amount that would be the asset’s decline in value for the year under section 40‑82 of the Income Tax Assessment Act 1997, assuming the reference in subparagraph 40‑82(3A)(b)(ii) of that Act to 31 December 2020 were instead a reference to the 2020 budget time; and (a) the amount that would be worked out under paragraph 40‑130(2)(a) or (4)(a) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(a) and (4)(a) to 30 June 2021 were instead references to the 2020 budget time; and (c) the amount that would be worked out under paragraph 40‑130(2)(b) or (4)(b) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(b) and (4)(b) to “the amount worked out under paragraph (a)” were instead references to “the amounts worked out under paragraphs 40‑170(4)(a) and (b)”. (a) the amount that would be the asset’s decline in value for the year under Division 40 of the Income Tax Assessment Act 1997, disregarding any amounts included in the eligible second element worked out under section 40‑175 of this Act for the asset for the year; and The amount worked out under this section (the eligible second element) for a depreciating asset for an income year is the sum of any amounts included in the second element of the asset’s cost at a time that is in both of the following periods: (1) For an income year later than a year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (2) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (3) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) This section applies if the decline in value for a depreciating asset for an income year is worked out under this Subdivision, and at a time (the balancing adjustment time) in a later income year: (i) it becomes not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (b) none of the requirements in paragraphs 40‑295(1)(a), (b) or (c) of the Income Tax Assessment Act 1997 are satisfied in relation to the asset. (2) For the purposes of Subdivision 40‑D of the Income Tax Assessment Act 1997 assume that, at the balancing adjustment time, you stop using the asset, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again. (3) For the purposes of section 40‑180 of the Income Tax Assessment Act 1997 assume that the reference in item 3 of the table in subsection 40‑180(2) of that Act to “because you stop using it for any purpose expecting never to use it again” were instead a reference to “because of section 40‑185 of the Income Tax (Transitional Provisions) Act 1997”. (4) If a balancing adjustment event happens to a depreciating asset you hold because of this section, this Subdivision cannot apply to work out the decline in value of the asset for a later income year. (1) You may choose that the decline in value of a particular depreciating asset for an income year is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year. (1) Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40. (a) you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset: (ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and (4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day. (5) The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if: (i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or (ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and  > sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose. (7) Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens: (a) if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b). (i) an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and (ii) the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and (3) The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount. (a) on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and (c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and (ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal; (2) There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal. (3) Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount. If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997. (a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and (b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and: (i) the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, the R&D entity is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—a clawback amount under section 355‑447 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑466 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. (b) section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions. > Note 2: The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and: (i) the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset; (ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, an R&D entity (the partner) that is a partner in the R&D partnership and is entitled to one or more new law deductions for one or more income years for the asset, is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—a clawback amount under section 355‑449 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑468 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s new law deductions mentioned in paragraph (2)(b) of this section. (4) Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event. > Note: Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions. (1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant. (b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and (3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it. (a) there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and (b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act. (2) The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor. (3) The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and <table cellspacing="0" cellpadding="0" style="width:364.2pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:353.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading" style="page-break-inside:avoid"><span>Conditions for small business taxpayers retaining accelerated rates</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Condition</span></p></td></tr></thead><tbody><tr><td style="width:21.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:321.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>The transferee must have been a small business taxpayer for the income year (the </span><span style="font-weight:bold; font-style:italic">start year</span><span>) that includes the time when the entity first used the plant, or first had it installed ready for use.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>2</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>At that time, neither of these applies:</span></p><p class="Tablea"><span>(a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;</span></p><p class="Tablea"><span>(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection</span><span> </span><span>(5).</span></p></td></tr></tbody></table> ``` (4) For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership. (5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement. (a) for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or (i) replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and (ii) increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).  (b) if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11). (c) that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and (d) that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and (e) that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity. (a) for taxable supplies (if any) the entity makes during the year in the course of carrying on a business—the value (as defined by section 9‑75 of the GST Act) of the supplies; and (b) for other supplies the entity makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies. (1) The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for: (a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (c) for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or (d) for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant. (3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115. (4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain. (5) Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee. (i) the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or (a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and (1) A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act. (2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year. For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if: Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act. (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset): and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply. (i) for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or (ii) for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and (c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act. (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and (2) Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act. The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under: (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on: (2) You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act. (3) A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under: (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and (2) Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act. A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act. The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001. If: (d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act; (a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and (a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and (b) the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and (c) paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997. Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years. (1) For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section. (b) the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (b) that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (1) There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea" style="page-break-after:avoid"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a); and</span></p><p class="Tablea" style="page-break-after:avoid"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (b) disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (f) an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division. (4) If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45‑5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest. (5) If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45‑10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest. Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Disregard the use of the following amounts in determining (for the purposes of Subdivision 50‑A of the Income Tax Assessment Act 1997 whether a fund established before 1 July 1997 operates and pursues its purposes in Australia: Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years. (2) However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date. Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if: (b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time. Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years. 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years (1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act. <table cellspacing="0" cellpadding="0" style="margin-left:56.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:258.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Application provisions for specific sections</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-size:9pt; font-weight:bold">Item</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">This section of the </span><span style="font-size:9pt; font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-size:9pt; font-weight:bold"> ...</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">Applies as described in this provision of this Act ...</span></p></td></tr></thead><tbody><tr><td style="width:24.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55(1)</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>95</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>8</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td></tr></tbody></table> ``` (a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and (b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997. > Note: Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year. (b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997; sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997). > Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock. (3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997. (a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and (b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936; > Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal. #### 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997. (1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year. (2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936. (3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year: (a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners; (b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed. > Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year. > Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year. (b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year; the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year. (2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. (3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2). #### 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997. #### 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business (1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. (2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity. > Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997. (1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. (2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value. > Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997. #### 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year. (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. > Note: Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. > Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given). (5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act). (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment. > Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%. (5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%. (6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.  > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section. (b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4). Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age. Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later. Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies. Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3. (4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997. (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%. > Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986. (5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D. > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. (a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and (b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year). (3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and (2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual: (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income. > Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F. > Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997. > Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997. #### 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 (1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012. (2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies. (3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act. (b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009. (2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if: (i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest; (iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or (i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest; (iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009. (2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time. (4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2): (a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and (b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being: (ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and (c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and (d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if: (i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or (ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and (e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and (i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and (ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and (g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest. (a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced: (i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or (ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and (b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5. (2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right. (3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right. (2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. (3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section. Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years. (1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision. > Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision). > Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936). > Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997. (a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936. (1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936. (2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997. > Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997. (3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and (d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; (f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time. > Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and (d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015. (a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or (4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if: (b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset. The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year. (a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and (1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied: (b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and (d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works). (3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936. Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936. (b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006. (2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement. > Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement. Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual: (b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her. 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act (1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee). (2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year: (3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection. #### 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997. Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936). (2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if: (a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; (a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011); (b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986. > Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section. If: (a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and (b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936; Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995. (1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997. (2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997. (3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997. (4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997. > Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one. Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year: (a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and (b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year; the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation. Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset. (b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section); > Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply. (1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if: (a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and (2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value. (4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value. (a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997. (2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less. (1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936: (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. (1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if: (2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by: (a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or (a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or (2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period. Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year: If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997. (1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002. (2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset. (3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required. (i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and (ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and (c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and (f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997). (a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or (1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:  > total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part. (a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or (2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section. (3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1). (1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences. > Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997. (c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets). (4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act. (5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act. Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement. (a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and (2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time. (a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and (ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs. (2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer. (a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and (b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest; (2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event. (3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly. (4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly. <table cellspacing="0" cellpadding="0" style="width:362.55pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:351.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Creating a CGT asset</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">CGT event number</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Applicable amount</span></p></td></tr></thead><tbody><tr><td style="width:50.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D1</span></p></td><td style="width:290.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the incidental costs the originating company incurred that relate to the CGT event</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D2</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the option</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D3</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the right</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>F1</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred on the grant, renewal or extension of the lease</span></p></td></tr></tbody></table> ``` (5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day. A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision. (a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996. (b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. (b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend. (3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities. (1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company. (2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred. (3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company. (1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of: (2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of: (3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note. (1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised. (b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and (ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act. You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and (b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996. (c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and (c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over. (3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. (a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and (c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and (d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act. (3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division. Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years. A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: (1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day. (2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice. (a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and (b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and (a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and (b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and (c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group. (5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004. (6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection. (1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss): (b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions); and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time: (i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or (e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and (f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and (ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred; (2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if: (a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these: (i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset; (ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and (3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act. (a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and (b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section. (5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of: (a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and (b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset. Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. (ii) that could have been deducted, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the deduction had not been limited by the company’s income for that income year; and (ii) that could have been applied, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the application of the loss had not been limited by the company’s capital gains for that income year. 170‑C Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred #### 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years. #### 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). #### Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997. Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997. If: (a) all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (d) that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and (e) the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place. Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years. > introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament. Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day. #### Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting #### 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B. (1) The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day. (2) No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted. #### 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting (1) Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if: (a) the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and (b) none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount. (2) No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount. (1) This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account. (2) For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. > Note 2: If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60. (3) For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)). (4) For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. (5) The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if: (a) during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and (b) the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section. (a) the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and (b) during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components. (7) For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. (8) Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it: (b) the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component. (9) Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component. (10) For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002: (b) lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination; (c) a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination); (e) the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination); (f) the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination). Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period: 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows: (a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and (i) in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and (ii) in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. > Note: A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002. #### 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002: (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:23.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:87.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A franking surplus</span></p></td><td style="width:220.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.009.png" width="175" height="58" alt="Start formula Amount of the class A franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.010.png" width="190" height="56" alt="Start formula Amount of the class B franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.011.png" width="190" height="56" alt="Start formula Amount of the class C franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` #### 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus): (a) a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Original surplus</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:85.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>class A</span></p></td><td style="width:220.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.012.png" width="169" height="38" alt="Start formula Amount of the original class A surplus times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.013.png" width="169" height="38" alt="Start formula Amount of the original class B surplus times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.014.png" width="169" height="38" alt="Start formula Amount of the original class C surplus times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (4) If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit): (a) a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company. (5) The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking deficit into 1997 Act franking debit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Original deficit</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking debit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(4)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:70.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A</span></p></td><td style="width:235.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.015.png" width="164" height="38" alt="Start formula Amount of the original class A deficit times start fraction 39 over 61 end fraction end formula "></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.016.png" width="164" height="38" alt="Start formula Amount of the original class B deficit times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.017.png" width="164" height="38" alt="Start formula Amount of the original class C deficit times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (2) A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if: (c) the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions. (3) The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if: (b) the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and (1) While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit. (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year. (3) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: > Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act. (1) The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account. (a) a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time; (3) If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if: (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity. #### 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If: the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time. (1) Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections. (2) If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year. Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year. Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year. (5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in: that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement. (6) The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (7) The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (2) The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (3) The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (i) are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and (a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and (b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section. (a) whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and (1) This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002. (a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and (3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded. (1) This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002; (2) If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (3) If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (4) If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. (5) If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows: (a) any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and (i) in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and (ii) in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. #### 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF.  #### 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act). (2) If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus): (a) a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF. (4) If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit): (a) a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF. This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period). (1) The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period: (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (1) The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period. (2) The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner. (3) The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5. (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and (d) the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner; the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received. (3) A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time: (1) A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends. (2) However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period. (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (a) the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed: (d) the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and (e) the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return. (2) The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day. (1) The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period. (2) The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made. Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period. (b) on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax); the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed: (c) the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and (d) the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return. (2) The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day. The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period: If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day. If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and If: (a) a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and (b) the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment; In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment. If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment. The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with. If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953. (1) Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period. (a) the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and (b) the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3); the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on: (c) if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or If: Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax. Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division. If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997. (a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day: (3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002. (a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002: > Note: As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date. (b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997. In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003. (1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year. (a) a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of: (i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time; (iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period; (2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if: (b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time: (ii) the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. > Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. > Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. (7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table: <table cellspacing="0" cellpadding="0" style="width:365.35pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount of the franking credit and the exempting debit</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">If:</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the credit and debit is:</span></p></td></tr></thead><tbody><tr><td style="width:22.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The period starts immediately after 7.30</span><span> </span><span>pm by legal time in the Australian Capital Territory on 13</span><span> </span><span>May 1997</span></p></td><td style="width:141.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Both these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was not in surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>All these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was in surplus at the start of the period;</span></p><p class="Tablea"><span>(c) the surplus in the account at the switch time is greater than the surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the franking surplus in the Australian company’s franking account at the switch time; and</span></p><p class="Tablea"><span>(b) the franking surplus in the Australian company’s franking account at the start of the period</span></p></td></tr></tbody></table> ``` (a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and (b) the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period. Subdivision 235‑I of the Income Tax Assessment Act 1997 applies to assets acquired by the trustee of an instalment trust in: (1) Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years. (2) However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time). (3) The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997. Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997. (2) Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in: (1) Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that: (b) is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose. (a) if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007. > Note: To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997. (b) contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option; the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option. (3) For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5). (4) If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is: (a) the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less (b) the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest. (5) If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is: (6) If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil. (1) If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one. (2) If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year. (3) If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year. (a) for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and (b) for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year: Step 1. Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. Step 2. Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3). Step 3. If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year. > Note: Example: Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75): (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred: (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times: (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate. Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008. (a) the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and (b) the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities: (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (i) the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or (ii) the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and (f) none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made: (i) Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event; (ii) a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year. (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (b) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (c) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year #### 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year (a) the requirements set out in paragraphs 275‑610(1)(a), (b) and (c) of the Income Tax Assessment Act 1997 are satisfied in respect of an amount of non‑arm’s length income of a managed investment trust in relation to an income year; and (b) the managed investment trust became a party to the scheme mentioned in paragraph 275‑610(1)(a) of that Act before the day on which the Bill that became the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 was introduced into the House of Representatives; and Division 276 of the Income Tax Assessment Act 1997 as inserted in that Act by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (the amending Act) applies as set out in subitem 1(1) of Schedule 8 to the amending Act. (b) if the trustee of the trust has made a choice for the purposes of paragraph 1(1)(b) of Schedule 8 to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016—the first income year starting on or after 1 July 2015; or (c) if the trustee of the trust has made a choice for the purposes of subparagraph 276‑10(1)(e)(i) of the Income Tax Assessment Act 1997 in respect of the 2016‑17 income year—that income year. (c) the trust is an AMIT for an income year (the discovery year) that is the starting income year or a later income year. (1) This section applies if the trust has an under or over of a character in the discovery year relating to the base year. (b) if, at a time, the trust sent its members distribution statements for an income year that is prior to the starting income year—assume that the trust sent those members AMMA statements for that income year at that time. (3) For the purposes of Division 276 of the Income Tax Assessment Act 1997, treat the under or over mentioned in subsection (1) as an under or over of the AMIT, in the discovery year relating to the base year, of the character mentioned in that subsection. (a) had the under or over mentioned in subsection (1) been discovered before the starting income year, this Act would have operated to produce a particular effect (the pre‑AMIT scheme effect) for the base year in relation to the amount or amounts reflected in the under or over; and 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT #### 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT (b) working out the amount (if any) of the entity’s capital gain under subsection 104‑70(4) of the Income Tax Assessment Act 1997. (3) For the purpose of working out the amount of the non‑assessable part mentioned in paragraph 104‑70(1)(b), treat the following provisions as being in operation at the time the payment was made: (b) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in paragraph (a). (4) Subsection (3) does not apply to the extent (if any) that the entity, in the income tax return that it lodged for the income year in which the payment was made, included the amount of the payment in its assessable income for that income year. (5) For the purposes of section 118‑20 of the Income Tax Assessment Act 1997, treat this section as being in Part 3‑1 of that Act. (2) The Commissioner cannot amend the entity’s assessment for the income year in which the payment was made in a particular way if: (b) the Commissioner could not amend the assessment in that way if the following provisions were in operation at the time the payment was made: (ii) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in subparagraph (i); and Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82‑10F). (2) The object of this section is to apply (with modifications) provisions limiting deductibility in respect of certain contributions made during the period that: (a) Subdivisions AA and AB of Division 3 of Part III of the Income Tax Assessment Act 1936, as in force just before they were repealed by the Superannuation Legislation Amendment (Simplification) Act 2007; (b) any other provision of the Income Tax Assessment Act 1936, or of any instrument made under that Act, to the extent that it relates to the operation of those Subdivisions; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of those Subdivisions. (b) the deduction limit mentioned in section 82AAC for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (c) the deduction limit mentioned in section 82AAT for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (d) Division 290 of the Income Tax Assessment Act 1997 did not apply to contributions made during the income year mentioned in paragraph (a). (2) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of a defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection and subsection (4), the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 5 September 2006; (b) the defined benefit interest mentioned in paragraph (2)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 5 September 2006, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (2)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (4) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of the defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection, the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 12 May 2009; (b) the defined benefit interest mentioned in paragraph (4)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 12 May 2009, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (4)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (1) The object of this section is to apply (with modifications) provisions relating to excess non‑concessional contributions tax in respect of certain contributions made during the period that: (b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision. (ea) in a case where paragraph 292‑95(1)(b) of that Act would have allowed the contribution mentioned in that paragraph to be made at a time within that period—that paragraph allowed the contribution to be made on or before 30 June 2007; and (f) paragraph 292‑95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and (fa) in a case where subsection 292‑100(2), (4), (7) or (8) of that Act would have allowed the contribution mentioned in that subsection to be made at a time within that period—that subsection allowed the contribution to be made on or before 30 June 2007; and (g) paragraph 292‑100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and (h) contributions made during that period that are covered under section 292‑100 of that Act reduce the person’s CGT cap amount for the 2007‑2008 financial year in accordance with subsection 292‑105(2) of that Act (and despite subsection (1) of that section); and (i) if the conditions in subsection (4) are satisfied—the person’s excess non‑concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and (b) the Commissioner gives the person a transitional release authority under subsection 292‑80A(2) in response to the application; and (c) the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292‑80B within 21 days after the date of the release authority; and (d) the superannuation provider pays the person the amount required under section 292‑80C in relation to the transitional release authority. (b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act). (6) The amount to be included in the first person’s amount of non‑concessional contributions under subparagraph (3)(b)(ii) is the sum of: (a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and (b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made. (c) under Division 295 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)), the contribution is included in the assessable income of the superannuation provider in relation to the superannuation plan to which the contribution is made; and (8) For the purposes of paragraph (7)(b), treat the person as an employee of the other entity if the person would be treated as an employee of the other entity under Division 290 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)). (1) A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007. (2) The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292‑80(3)(b)(i), the person would have excess non‑concessional contributions for the financial year mentioned in paragraph 292‑80(3)(a). (4) For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out: The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 21 days after the date of the release authority. (1) A superannuation provider that has been given a transitional release authority in accordance with section 292‑80B must pay to the person within 30 days after receiving the release authority the least of the following amounts: (a) if the person requests the provider in writing to pay a specified amount in relation to the release authority—that amount; (c) the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person in complying superannuation plans. > Note 1: Section 288‑95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection. > Note 2: Section 288‑100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority. > Note 3: For reporting obligations on the superannuation provider in these circumstances, see section 390‑65 in Schedule 1 to the Taxation Administration Act 1953. (2) The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person in complying superannuation plans. (3) Section 307‑125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section. (a) your non‑concessional contributions cap for the 2015‑2016 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsection 292‑85(7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 applies after the commencement of this section as if: (d) subsection 292‑85(6) of that Act as so amended had been applied (taking into account paragraph (c) of this subsection) for the purposes of working out your non‑concessional contributions cap for the 2016‑2017 financial year. (2) For the purposes of working out your non‑concessional contributions caps for the 2017‑2018 financial year and the 2018‑2019 financial year, if: (a) your non‑concessional contributions cap for the 2016‑2017 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsections 292‑85(6) and (7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 apply after the commencement of this section as if the amount worked out under subsection 292‑85(5) of that Act as so amended were $380,000. (3) To avoid doubt, this section does not affect your non‑concessional contributions cap for any financial year that ended before 1 July 2017. The tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your non‑concessional contributions (see section 292‑90 of the Income Tax Assessment Act 1997) for the financial year. (2) Subject to section 294‑55, the amendments of Division 294 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Treasury Laws Amendment (2017 Measures No. 2) Act 2017 apply on and after 1 July 2017. Despite sections 294‑30 and 294‑140 of the Income Tax Assessment Act 1997 (which are about when you have excess transfer balance), you do not have excess transfer balance in your transfer balance account on any day in the period of 6 months beginning on 1 July 2017 if: (a) the only transfer balance credits in the account in that period arose under item 1 of the table in subsection 294‑25(1) of that Act (which is about superannuation income streams you have just before 1 July 2017); and (b) the sum of those transfer balance credits exceeds your transfer balance cap, but is less than or equal to $1,700,000; and (c) at the end of the period, the sum of all the transfer balance debits arising in your transfer balance account equals or exceeds the amount of the excess from paragraph (b). (1) Despite subsection 294‑10(2), a transfer balance credit arises under item 4 of the table in subsection 294‑25(1) of the Income Tax Assessment Act 1997 only in relation to a borrowing that arises under a contract entered into on or after 1 July 2017. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2017 is treated as if it arose under a contract entered into before 1 July 2017 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) on 1 July 2017, a transfer balance debit arose in your transfer balance account under item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997; and (b) the sum of all the transfer balance credits that arise in your transfer balance account under item 1 of the table in subsection 294‑25(1) of that Act exceeds the amount that would, apart from this section, be the amount of that debit. (2) Despite column 2 of item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997, the amount of the transfer balance debit is instead equal to the sum worked out under paragraph (1)(b) of this section. 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain > The object of this Subdivision is to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the following legislative changes: (a) the introduction of a transfer balance cap (as a result of Schedule 1 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016); (b) the exclusion of transition to retirement income streams (and similar income streams) from being superannuation income streams in the retirement phase (as a result of Schedule 8 to that Act). (a) starting on the start of the day on which the Bill that became the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 was introduced into the House of Representatives; and (a) at the start of the pre‑commencement period, a CGT asset of a fund is a segregated current pension asset of the fund; and (i) at a time (the cessation time) in the pre‑commencement period, the asset ceases to be a segregated current pension asset of the fund; or (ii) at the start of 1 July 2017 (also the cessation time), the asset ceases to be a segregated current pension asset of the fund because it supports a superannuation income stream covered by subsection 307‑80(3) of the Income Tax Assessment Act 1997; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (b) the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year is greater than nil; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and #### 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑115(3)(a), the fund makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the fund’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Subsection 295‑390(1) of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). > 2016‑17 non‑exempt proportion means 1 minus the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year. #### 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset (i) the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997 in respect of the trust for the 2016‑17 income year; (ii) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year; and (d) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and #### 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑125(3)(a), the trust makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the trust’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Section 295‑400 of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). (a) unless paragraph (b) applies—1 minus the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997; or (b) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage worked out by subtracting the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year from 100%. This Subdivision applies to an entity that is the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust. For the purposes of this Subdivision, an asset is a 30 June 1988 asset of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust if the entity owned it at the end of 30 June 1988. > Note: Section 295‑90 of the Income Tax Assessment Act 1997 treats these assets as having been acquired on 30 June 1988. (1) The first element of the cost base of each 30 June 1988 asset of the entity’s is the greater of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). (2) The first element of the reduced cost base of each 30 June 1988 asset of the entity’s is the lesser of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). the market value of the asset as at the end of 30 June 1988 is the average of the highest and lowest trade prices for identical assets recorded on 30 June 1988 in whichever of the following markets is applicable: (d) if, on that date, there was a State capital city market (other than the Sydney market) that recorded a higher volume of trading than the Sydney market in identical assets—that State capital city market; (2) For the purposes of this section, an asset is taken to have been listed on an Australian stock exchange on 30 June 1988 if, and only if, on that day the asset had the status of having been granted official quotation by a securities exchange within the meaning of the former Securities Industry Act 1980 or the law of a State or Territory corresponding to that former Act. (b) at any time during the period commencing at the time when the shares were acquired and ending at the end of 30 June 1988, the company paid an amount that was not a dividend to the entity in respect of the shares; (b) at any time during the period commencing at the time when the interest or unit was acquired and ending at the end of 30 June 1988, the trustee of the trust paid an amount to the entity in respect of the interest or unit, being: (i) in a case where the entity was exempt from tax for the year of income in which the payment was made—an amount that, if the entity had not been exempt from tax, would not have been the entity’s assessable income; or the cost base to the entity of the interest or unit as at 30 June 1988 is reduced by so much of the amount as is not attributable to a deduction allowed under former Division 10C or 10D of the Income Tax Assessment Act 1936. (1) Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (2) and (3) of this section apply if an entity exercises rights or options as mentioned in that section to acquire: (b) the greater of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (b) the lesser of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (4) The payment referred to in subsection (2) or (3) can include giving property. To the extent that the payment does, use the market value of the property in working out the amount of the payment. (1) A notice given under subsection 82AAT(1A) or (1CB) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑170 of the Income Tax Assessment Act 1997. (2) A notice given under subsection 82AAT(1C) or (1CD) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑180 of the Income Tax Assessment Act 1997. (1) A proportion of the ordinary income and statutory income of a continuously complying fixed interest ADF of an income year that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).  > Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the income year. > Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the income year. (4) A choice for the purposes of the definition of reckoning time in subsection (5) must be made on or before the date of lodgment of the income tax return of the ADF for the income year to which the choice relates, or before a later day allowed by the Commissioner. > continuously complying fixed interest ADF, in relation to an income year (the current year), means a fund that is a fixed interest complying ADF in relation to each of the following years: > current 25 May balance, in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time: (b) subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 September 1989 is to be added to the balance; (b) a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that day, made a deposit with the ADF that consisted wholly or partly of the roll‑over (as defined in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 as in force on that day) of an eligible termination payment as so defined, being an eligible termination payment that included a concessional component (as so defined). > fixed interest complying ADF, in relation to a year of income, means a complying ADF where both of the following conditions are satisfied: (a) not less than 90% of the amount that, apart from this section, would be the assessable income of the ADF of the income year (other than non‑arm’s length income or amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997) consists of any one or more of the following: (ii) any profit arising on the disposal, redemption, cancellation or maturity of a CGT asset referred to in paragraph 295‑85(3)(b) of the Income Tax Assessment Act 1997; (iii) an amount included in assessable income under Division 16E of Part III of the Income Tax Assessment Act 1936 (or would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply); (ii) virtual PST life insurance policies (as defined in the Income Tax Assessment Act 1997) issued by a life insurance company. > original 25 May balance, in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988. > reckoning time, in relation to an ADF in relation to an income year, means the beginning of the income year, or such other time during the income year as the ADF chooses in accordance with subsection (4). (6) This section does not apply to an ADF in relation to an income year unless the whole of the benefit that would accrue to the ADF from the application of this section in relation to the income year has been, or can reasonably expected to be, passed on to eligible depositors. An election made by the trustee of a complying superannuation fund under subsection 279(4) of the Income Tax Assessment Act 1936 that had effect for the income year of the fund in which 30 June 2007 occurs continues to have effect as if it had been made under section 295‑465 of the Income Tax Assessment Act 1997. Subdivisions 295‑I (no‑TFN contributions) and 295‑J (Tax offset for no‑TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006‑2007 income year ends on a day (the end day) after 1 July 2007 as if: (b) the entity’s no‑TFN contributions income for the entity’s 2007‑2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007‑2008 income year if the contributions concerned had been made in the entity’s 2007‑2008 income year. (2) Division 301 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section because you are a member of the fund in the same way as it would apply if the payments were superannuation member benefits paid to you from a complying superannuation fund. For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. Subdivision 301‑F of the Income Tax Assessment Act 1997 applies in relation to income years starting on or after 1 July 2007. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to the following in respect of an income year that starts on or before 1 July 2021: (b) the amendments of the Income Tax Assessment (1997 Act) Regulations 2021 made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023. (a) a superannuation benefit (the trigger benefit) was paid to a person in the 2020‑21 income year or an earlier income year; and (c) the trigger benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; and (2) The Commissioner cannot amend an assessment on the basis that a superannuation benefit paid to the person is a superannuation income stream benefit because of the amendments made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 if: (iii) the superannuation benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (a) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (b) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. (1) The Minister may, by legislative instrument, make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions) that: (a) relate to the amendments or repeals made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023; and (2) Without limiting subsection (1), rules made under this section before the end of the period of 12 months starting on the day that Schedule commences may provide that provisions of that Schedule, or any other Act or instrument, have effect with any modifications prescribed by the rules. Those provisions then have effect as if they were so modified. (2) Division 302 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section after another person’s death, because the other person was a member of that fund, in the same way as it would apply if the payments were superannuation death benefits paid to you from a complying superannuation fund. For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if: (b) just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. (2) For the purposes of Subdivision 82‑B of Division 82, Division 302 and section 303‑5 of the Income Tax Assessment Act 1997, the definition of death benefits dependant in section 302‑195 of that Act applies as if paragraphs (a) and (b) of the definition were replaced with the following paragraphs: (a) a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008 or a person who was formerly such a spouse; or (b) a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008, who is aged less than 18. (ii) a superannuation guarantee payment, a small superannuation account payment, an unclaimed money payment, a superannuation co‑contribution benefit payment or a superannuation annuity payment. (2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you at a time in the period: (i) a condition of release specified in item 107A or 207AA of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; or (ii) a condition of release specified in item 109AA of the table in Schedule 2 to the Retirement Savings Accounts Regulations 1997. (1) This section applies to a superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with section 292‑80B. (2) The superannuation benefit is not assessable income and is not exempt income to the extent that it does not exceed the amount mentioned in subsection (3). (3) The amount is the amount of excess non‑concessional contributions stated in the release authority in accordance with paragraph 292‑80A(3)(a), reduced (but not below zero) by the amount of any superannuation benefit that was not assessable income and not exempt income under a previous operation of subsection (2) in relation to the release authority. (4) The superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3). (a) you have an interest in a FIF (within the meaning of Part XI of the Income Tax Assessment Act 1936, as in force just before the commencement of item 37 of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010) (the paying fund); and (b) Subdivision 305‑B of the Income Tax Assessment Act 1997 applies in relation to the paying fund (see section 305‑55 of that Act); and (c) the paying fund transfers an amount to a complying superannuation fund in respect of you during the deduction year; and (d) you choose under section 305‑80 of the Income Tax Assessment Act 1997 that the amount, or part of the amount, is to be treated as assessable income of the complying superannuation fund; and (e) immediately before the transfer happens, there is a post‑FIF abolition surplus (within the meaning of the Income Tax Assessment Act 1936) for the paying fund in relation to you; and For the purposes of the definition of specified roll‑over amount in the Income Tax Assessment Act 1997, treat the taxable component of a directed termination payment (within the meaning of section 82‑10F) as the element untaxed in the fund of a superannuation benefit that is a roll‑over superannuation benefit. (1) This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007. > Note: This section also applies to an income stream replacing an earlier one because of an involuntary roll‑over (see section 307‑127). (2) Despite subsection 307‑125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows: (a) first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007); (b) next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits. The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit. (3) Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened: (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day; (ba) the holder of the superannuation interest is aged 60 or above on 1 July 2007, if none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day. (a) treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and (b) work out the tax free component of the superannuation interest for the purposes of section 307‑125 of the Income Tax Assessment Act 1997 under subsections (6) and (6A). (i) an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and (ii) the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time; (b) next, work out the unused undeducted purchase price (within the meaning of paragraph (a) of the definition of that term in subsection 27A(1) of the Income Tax Assessment Act 1936 just before the commencement of this section, and disregarding paragraphs (b) and (c) of that definition) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007; (c) next, work out the pre‑July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this section) of the eligible termination payment. (a) at least one superannuation income stream benefit was paid from the superannuation income stream before 1 July 1994; or (b) section 27AAAA of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007) applied to the superannuation income stream just before 1 July 2007; (7) For the purposes of paragraph (6)(c), disregard the value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment. (8) If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as: (b) if 1 or more other events mentioned in subsection (3) happened before the commutation—the time just before the earliest of those events happens. (a) references in that section to the later income stream (in relation to a time, or event happening, before the payment of that involuntary roll‑over superannuation benefit) include references to the earlier income stream; and (b) references in that section to the superannuation interest supporting the later income stream (in relation to a time, or event happening, before the payment of that benefit) include references to the earlier interest. (1) This section applies for the purposes of working out the amount of your total superannuation balance just before 1 July 2017. (2) The transfer balance mentioned in paragraph 307‑230(1)(b) of the Income Tax Assessment Act 1997 just before 1 July 2017 is taken to be equal to: (a) the sum of the transfer balance credits (if any) in your transfer balance account just after the start of 1 July 2017; less (b) the sum of the transfer balance debits (if any) arising in your transfer balance account on 1 July 2017 under item 4 of the table in subsection 294‑80(1) of that Act (about payment splits). (1) Section 307‑231 of the Income Tax Assessment Act 1997 applies in relation to borrowings that arise under contracts entered into on or after 1 July 2018. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2018 is treated as if it arose under a contract entered into before 1 July 2018 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) treat a deduction made under former section 279 of the Income Tax Assessment Act 1936 as having been made under section 295‑465 of the Income Tax Assessment Act 1997 instead; and (b) treat a deduction made under former section 279B of the Income Tax Assessment Act 1936 as having been made under section 295‑470 of the Income Tax Assessment Act 1997 instead. If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007‑2008 income year is, despite subsection 307‑345(1), the total of: (b) the amount by which $140,000 exceeds the upper limit for the 2006‑2007 income year (worked out under section 159SG of that Act). Division 316 of the Income Tax Assessment Act 1997 applies in relation to demutualisations occurring on or after 1 July 2008. If: (a) any assets held by the benefit funds of a life insurance company that is a friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a complying superannuation fund; and (b) the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer; the transfer is disregarded for any purposes of the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936. (1) In working out the amount that a life insurance company can deduct, in respect of life insurance policies that are disability policies (other than continuous disability policies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income. (2) In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection (1) applies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company’s liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320‑85(4) of that Act. If: (2) If the life insurance company wishes to include a part of an approved asset in its virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑87(2) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society establishes a virtual PST in the 2000‑01 income year, the calculation of the transfer values of the company’s virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year. (1) Subsection (3) applies for the purposes of subparagraph (b)(i) of the definition of virtual PST life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 259 of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007. (2) Subsection (3) also applies for the purposes of subparagraph (b)(i) of the definition of complying superannuation/FHSA life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 47 of Schedule 7 to the First Home Saver Accounts (Consequential Amendments) Act 2008. (3) Treat an annuity as having been purchased out of a superannuation lump sum or an employment termination payment, if the annuity was purchased: (b) out of an eligible termination payment (within the meaning of the Income Tax Assessment Act 1997, as in force just before the commencement mentioned in subsection (1) of this section). (2) If the life insurance company wishes to include a part of an approved asset in its segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (a) a life insurance company had a liability before 1 July 2000 under a life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and (c) there is a transfer of the company’s assets to the segregated exempt assets to meet that liability or that part of the liability; (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑105(1) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320‑225 of the Income Tax Assessment Act 1997 in the 2000‑01 income year, the calculation of the transfer values of the company’s segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year. Section 322‑25 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Part VC of the Insurance Act 1973 after 17 October 2008. 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you > new Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force after the commencement of this section. > old Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. > STS taxpayer means an STS taxpayer within the meaning of Division 328 of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. #### 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years (1) This section applies for the purpose of working out whether you are a small business entity (other than because of subsection 328‑110(4) of the Income Tax Assessment Act 1997) for the 2007‑08 or 2008‑09 income year. (2) You work out your aggregated turnover for the 2005‑06 or 2006‑07 income year as if the amendments made by Schedule 1 to the Tax Laws Amendment (Small Business) Act 2007 had been in force in relation to that year. (a) your aggregated turnover for the 2005‑06 income year (worked out in accordance with subsection (2)) is $2 million or more; but (b) your STS group turnover for that year (worked out under Subdivision 328‑F of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section) is less than $2 million. (2) The following provisions apply as if you are a small business entity for the income year in which you are winding up the business: #### 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you (1) For the purpose of working out whether you are a small business entity for the 2007‑08, 2008‑09, 2009‑10 or 2010‑11 income year (each a relevant income year) for the purposes of a provision to which subsection (3) applies: (2) An entity (the first entity) controls a discretionary trust for a relevant income year if, for any of the 4 income years (a previous income year) before that year: (a) if the previous income year is before the 2007‑08 income year—the trustee of the trust made a distribution of $100,000 or more to the first entity, any of its affiliates, or the first entity and any of its affiliates; or (i) the trustee of the trust paid to, or applied for the benefit of, the first entity, any of the first entity’s affiliates, or the first entity and any of its affiliates, any of the income or capital of the trust; and (ii) the percentage (the control percentage) of the income or capital paid or applied is at least 40% of the total amount of income or capital paid or applied by the trustee for that year. (1) This section sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (2) This section also sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (3) Any ordinary income that, apart from paragraph 328‑105(1)(a) of the Income Tax Assessment Act 1997 (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have derived before the changeover year (while you were using the STS accounting method) and you have not included in your assessable income because you have not received it is included in your assessable income for the changeover year. (4) Any general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, that, apart from paragraph 328‑105(1)(b) of that Act (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have incurred before the changeover year (while you were using the STS accounting method) and that you have not deducted because you have not paid them can be deducted for the changeover year. (b) for any later income year for which you are a small business entity but only if you used the STS accounting method for the income year before that later year. > Note: Example: You are a small business entity for the 2007‑08 and 2008‑09 income years and you continue to use the STS accounting method for those years. You are not a small business entity for the 2009‑10 income year so you cannot continue to use the STS accounting method for that year. Because you cannot use the STS accounting method for the 2009‑10 income year, you will not be able to use it again for a later income year even if you are a small business entity for that later year. In sections 328‑115 and 328‑120, STS accounting method means the accounting method that was required by the Income Tax Assessment Act 1997 to be used by STS taxpayers for the 2004‑05 income year. (b) you made a choice under subsection 328‑175(3) of old Subdivision 328‑D in relation to a depreciating asset you use to carry on a primary production business and for which you could deduct amounts under Subdivision 40‑F or 40‑G of the Income Tax Assessment Act 1997. (2) In determining whether you can choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997 in an increased access year, disregard subsection 328‑175(10) of that Act. (3) In applying paragraph 328‑175(10)(b) of that Act for the purpose of determining whether you can choose to use that Subdivision in any income year after the increased access years, disregard: (4) Paragraph 328‑180(1)(b) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that paragraph to $1,000: (i) first used the asset, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (i) first used the asset, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (i) first used the asset, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, on or after 1 July 2023 and on or before 30 June 2026. (a) a reference in that paragraph to the end of the income year in which you start to use the asset, or have it installed ready for use, for a taxable purpose were a reference to the earlier of: if: (i) first used the asset, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021. (5) Paragraph 328‑180(2)(a) or (3)(a) of the Income Tax Assessment Act 1997 applies to an amount included in the second element of the cost of an asset as if a reference in that paragraph to $1,000: (5A) For the purposes of determining whether, under subsection 328‑180(2) of the Income Tax Assessment Act 1997, you can deduct, for an income year (the current year), the taxable purpose proportion of an amount included in the second element of the cost of an asset, disregard paragraph (b) of that subsection if: (2) For the purposes of determining whether subsection 328‑180(1) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (b) of that subsection (which sets a limit of $1,000 on the cost of the asset) if, in the period beginning at the 2020 budget time and ending on 30 June 2023, you: (3) For the purposes of determining whether subsection 328‑180(2) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (a) of that subsection (which sets a limit of $1,000 on the amount) if the amount is included in the second element of the cost of the asset at any time in the period beginning at the 2020 budget time and ending on 30 June 2023. (4) In applying paragraph 328‑180(3)(a) of the Income Tax Assessment Act 1997 to an asset, disregard an amount included in the second element of the cost of the asset if the amount is deducted under subsection 328‑180(2) of that Act, as modified by subsection (3) of this section. (5) Section 328‑210 of the Income Tax Assessment Act 1997 applies as if the words “less than $1,000 but” in subsection (1) were disregarded, in relation to a deduction for an income year that ends: Subsection 328‑190(2) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that subsection to 15% were a reference to 57.5% if you are covered by section 40‑125 for the asset (which is about backing business investment). (1) A depreciating asset of yours that had been allocated to your general STS pool is treated as being allocated to your general small business pool. (2) A depreciating asset of yours that had been allocated to your long life STS pool is treated as being allocated to your long life small business pool. (3) If you made a choice, under subsection 328‑185(5) of old Subdivision 328‑D, not to have a depreciating asset allocated to your long life STS pool, the choice has effect for the purposes of subsection 328‑185(5) of new Subdivision 328‑D. (1) This section applies if a depreciating asset of yours is treated as being allocated to your general small business pool or long life small business pool under section 328‑185. (2) The opening pool balance of your general small business pool or long life small business pool for the 2007‑08 income year is taken to be the closing pool balance of your general STS pool or long life STS pool, as the case requires, for the 2006‑07 income year, reduced or increased by any adjustment required under section 328‑225 of new Subdivision 328‑D (about change in the business use of an asset). (a) you were not an STS taxpayer for the 2006‑07 income year (because you stopped being an STS taxpayer before that time); but (b) you are a small business entity for the 2007‑08 income year or a later income year and you choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets for that income year; the opening pool balance of your general small business pool or long life small business pool includes the sum of the taxable purpose proportions of the adjustable values of depreciating assets allocated to the pool under subsection 328‑185(3) of new Subdivision 328‑D for that year. (1) This section applies for the purposes of applying Subdivision 328‑D of the Income Tax Assessment Act 1997 for the 2012‑13 income year and later income years. (2) A depreciating asset that had been allocated to your long life small business pool is treated as being allocated to your general small business pool. (a) the closing pool balance of your general small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under section 328‑225 of that Act; and (b) the closing pool balance of your long life small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under that section. (1) This section applies if you chose to stop being an STS taxpayer for the 2005‑06 income year or the 2006‑07 income year. (2) You cannot choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets until at least 5 years after the income year for which you chose to stop being an STS taxpayer. > Note: Subdivision 328‑D of the Income Tax Assessment Act 1997 continues to apply to depreciating assets that have been allocated to your small business pools even if you are not a small business entity, or do not choose to use that Subdivision, for an income year: see section 328‑220 of that Subdivision. (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct 20% of particular expenditure for your 2023‑24 income year if: (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (d) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑450 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (6) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (ii) if the provider is a registered body of a kind listed in paragraph (2)(b), (c) or (d)—the training is within the provider’s scope of registration for that kind of registered body; and (d) each enrolment, or arrangement, for the provision of the training is made or entered into at or after 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022; and > Note: Paragraphs (b) and (c) mean this section will not apply to expenditure for on‑the‑job training or training provided by you in house. (a) a registered higher education provider (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); (b) a NVR registered training organisation (within the meaning of the National Vocational Education and Training Regulator Act 2011); (c) a registered education and training organisation (within the meaning of the Education and Training Reform Act 2006 (Vic.)); (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct for your 2023‑24 income year an amount that is equal to the sum of: (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (3) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑460 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (4) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (b) you incur the expenditure in the period starting at 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022 and ending at the end of: (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (4) For the purposes of paragraphs (1)(c) and (2)(c), in working out whether you can deduct an amount of expenditure on a depreciating asset, assume that: (b) throughout that effective life, you will use the asset for a taxable purpose to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose. (a) 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑470(1) or (3) applies in relation to the income year; and > Note: The deduction relates to the period of 1 July 2023 to 30 June 2024. An entity may have deducted an amount under paragraph (a) for a previous income year if the entity has a substituted accounting period. (2) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑470 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (3) Sections 8‑10, 40‑215 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (c) you start to use the asset, or have it installed ready for use, for any purpose after 30 June 2023 but before 1 July 2024; and (d) you start to use the asset, or have it installed ready for use, for a taxable purpose at a time (the start time) that is: (e) you are a small business entity, or an entity covered by subsection (4), for the income year that includes the start time; and (h) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) a new reasonably comparable depreciating asset that uses a fossil fuel (other than a use of which that is merely incidental) is available in the market at the start time; (ii) if the asset is being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than the other asset; (iii) if the asset is not being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than a new reasonably comparable depreciating asset that is available in the market at the start time; or (i) a depreciating asset (other than an asset excluded under subsection (6)) that uses electricity, or energy that is generated from a renewable source, to be more energy efficient; (iv) the use of electricity, or energy that is generated from a renewable source, by another depreciating asset to be monitored. (a) the amount is included in the second element of a depreciating asset’s cost under paragraph 40‑190(2)(a) of the Income Tax Assessment Act 1997; and (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (d) you are a small business entity, or an entity covered by subsection (4), for the income year in which the expenditure is incurred; and (i) if the asset could use a fossil fuel (other than a use of which that is merely incidental)—the asset to only use electricity, or energy that is generated from a renewable source; (ii) if the asset uses electricity, or energy that is generated from a renewable source—the asset to be more energy efficient; (g) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) For the purposes of paragraph (1)(b) or (3)(b), in working out whether you can deduct an amount of expenditure assume that: (i) for the purposes of paragraph (1)(b)—to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose; or (ii) for the purposes of paragraph (3)(b)—to the same extent as you use it for a taxable purpose in the income year in which the expenditure is incurred. (b) expenditure (other than expenditure referred to in subparagraph (3)(e)(i)) on an asset that can use a fossil fuel (other than a use of which that is merely incidental); (c) an asset that solely or predominantly generates electricity from a renewable source (for example, photovoltaic cells) or expenditure on such an asset; (d) an asset, or expenditure, being capital works for which you can deduct an amount under Division 43 of the Income Tax Assessment Act 1997; > Note: Subsections (1) and (3) also do not apply to an item of trading stock because such an asset is not a depreciating asset: see section 40‑30 of the Income Tax Assessment Act 1997. A reference in each of the following provisions of the Income Tax Assessment Act 1997 to a registration under section 27A of the Industry Research and Development Act 1986 includes a reference to a registration under former section 39J of that Act: (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) the R&D entity cannot deduct an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from: (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D entity could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:22pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the R&D entity is taken to be able to deduct under subsection 355‑315(2) of the new Act that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the R&D entity’s assessable income for the event year under subsection 355‑315(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 for the asset, the R&D entity is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑446 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the R&D entity is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑465 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: Section 355‑315 of the new Act would otherwise apply for the event in a case where the R&D entity had new law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by an R&D partnership; and (i) the partner can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the partner chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D partnership could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the partner is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:21.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D entity</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D partnership</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the partner is taken to be able to deduct under subsection 355‑525(2) of the new Act the partner’s proportion of that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the partner’s assessable income for the event year under subsection 355‑525(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partner’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if one or more partners (including the partner) in the R&D partnership is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset, the partner is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑448 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the partner is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑467 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s deductions under section 355‑520 of the new Act mentioned in subsection (4A) of this section. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the partner for the event, do so apply to the partner for the event. > Note 1: Section 355‑525 of the new Act would otherwise apply for the event in a case where the partner had new law deductions. Item 7 of the table in subsection 57‑110(2) in Schedule 2D to the Income Tax Assessment Act 1936 applies as if the deduction rules set out in the final column of that item also included former sections 73BA and 73BH of the Income Tax Assessment Act 1936. For the purposes of step 1 of the method statement in subsection 355‑415(2) of the Income Tax Assessment Act 1997, also disregard amounts that have already been taken into account under former subsection 73B(14AA) of the Income Tax Assessment Act 1936 for the R&D entity, the grouped entity and the R&D activities for an earlier income year. (1) This section applies if, apart from former paragraph 73B(10)(a) of the Income Tax Assessment Act 1936, an eligible company could deduct advance R and D expenditure in one or more income years commencing on or after 1 July 2011. > Note: That deduction would be under former section 73B of that Act as that former section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (a) apart from Subdivision H (prepaid expenditure) of Division 3 of Part III of the Income Tax Assessment Act 1936, an eligible company can deduct an amount under former section 73B, 73BA, 73BH, 73QA, 73QB or 73Y of that Act for an income year commencing before 1 July 2011; and (c) apart from former paragraph 73B(10)(a) of that Act, the eligible company could deduct an amount, as a result of that application of that Subdivision, for an income year commencing on or after 1 July 2011. > Note: That deduction would be under that Act as it applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (3) Former paragraph 73B(10)(a) of that Act is taken to apply to those income years commencing on or after 1 July 2011 as if the reference in that former paragraph to section 39J of the Industry Research and Development Act 1986 were a reference to section 27A of that Act. (4) An expression used in this section that is also used in former section 73B of the Income Tax Assessment Act 1936 has the same meaning in this section as it has in that former section. This Subdivision applies to core technology (within the meaning of former section 73B of the Income Tax Assessment Act 1936) if: (a) you incurred core technology expenditure (within the meaning of that former section) in an income year commencing before 1 July 2011 in relation to the core technology under one or more contracts entered into at or after the time referred to in former subsection 73B(12) of that Act; and (b) that expenditure (the undeducted expenditure) cannot be deducted for the last income year commencing before 1 July 2011. (1) This section applies for the purposes of Division 40 of the Income Tax Assessment Act 1997, other than sections 40‑292 and 40‑293 of that Act, if the core technology (the asset) is a depreciating asset. (2) Disregard this section, including its effect on the amount you can deduct under section 40‑25 of that Act for the asset, for the purposes of working out: (3) The asset’s opening adjustable value for the first income year that commences on or after 1 July 2011 (the first new income year) is equal to the amount of the undeducted expenditure. (4) Subsection 40‑75(2) of the Income Tax Assessment Act 1997 applies to the asset as if the first new income year were a change year (within the meaning of that subsection). If the core technology is not a depreciating asset, you can deduct the undeducted expenditure in equal proportions over a period of 5 income years starting in the first income year commencing on or after 1 July 2011. To work out the film component (if any) of your tax loss for the 1997‑98 income year or a later income year, apply former section 375‑805 of the Income Tax Assessment Act 1997. If you incurred a film loss for the purposes of former section 79F (Film losses of 1989‑90 to 1996‑97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989‑90 to 1996‑97 income years, that film loss is the film component of your tax loss for that income year. (1) To work out your film loss (if any) for the purposes of the Income Tax Assessment Act 1997 for the 1989‑90 or a later income year, apply former section 375‑810 of that Act. (2) You can deduct in the 1997‑98 or a later income year your film loss for any of the 1989‑90 to 1996‑97 income years only to the extent that it has not already been deducted. (1) Division 392 of the Income Tax Assessment Act 1997 applies to assessments for the 1998‑99 income year and later income years. (a) it had applied to your assessment for each income year before the 1998‑99 income year for which Division 16 of Part III of the Income Tax Assessment Act 1936 applied in relation to your income; and (b) you had carried on a primary production business during each income year before the 1998‑99 income year when you carried on a business of primary production; and (c) for each income year before the 1998‑99 income year you had a basic taxable income equal to your taxable income for the income year for the purposes of Division 16 of Part III of the Income Tax Assessment Act 1936. > Note: Section 149A of the Income Tax Assessment Act 1936 identifies what your taxable income for an income year is for the purposes of Division 16 of Part III of that Act. Division 392 of the Income Tax Assessment Act 1997 does not apply to your assessment for the 1998‑99 income year or a later income year if you made an election under section 158A (Election that Division not apply) of the Income Tax Assessment Act 1936 relating to an income year before the 1998‑99 income year. 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 A reference in Division 393 of the Income Tax Assessment Act 1997 to a deduction under section 393‑5 of that Act for making a farm management deposit is taken to include a reference to a deduction under section 393‑10 in Schedule 2G to the Income Tax Assessment Act 1936, as in force just before the commencement of this section, if the deposit was made before the 2010‑11 income year. #### 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 (b) the deposit was made with an FMD provider as a result of a request to which section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, applied; the unrecouped FMD deduction in respect of the deposit at that time is equal to the amount of the unrecouped deduction (within the meaning of the former subsection 159GA(3) of the Income Tax Assessment Act 1936) in respect of the deposit immediately before it ceased to be a deposit under the Loan (Income Equalization Deposits) Act 1976. > Note: This means that the unrecouped deduction relating to the deposit under the Loan (Income Equalization Deposits) Act 1976 continues to apply (by becoming an unrecouped FMD deduction) when the deposit is transferred to an FMD provider as a farm management deposit. The Loan (Income Equalization Deposits) Act 1976 was repealed on 22 February 2005. If a beneficiary of a trust was covered by paragraph (c) of the definition of primary producer in section 393‑25 in Schedule 2G to the Income Tax Assessment Act 1936 in the 2009‑10 income year, treat subsection 393‑25(3) of the Income Tax Assessment Act 1997 as having applied to the beneficiary for the purpose of determining the maximum number of choices that the trustee may make under subsection 393‑27(2) of that Act for the 2010‑11 income year. (a) a farm management deposit of an owner was unclaimed moneys for the purposes of section 69 of the Banking Act 1959; and (2) For the purpose of subsection 393‑10(1) of the Income Tax Assessment Act, treat the repaid unclaimed moneys as a repayment of the deposit of the owner. (3) To avoid doubt, the payment of unclaimed moneys to the Commonwealth under section 69 of the Banking Act 1959 is not a repayment of the deposit of the owner for the purposes of Division 393 of the Income Tax Assessment Act 1997. 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 #### 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 If a farm management deposit was made with an FMD provider as a result of a request under section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, then: (a) subsections 393‑40(1) to (4) of the Income Tax Assessment Act 1997 apply as if the day the deposit was made was the day on which the deposit was originally made under the Loan (Income Equalization Deposits) Act 1976; and (1) A copyright collecting society to which section 51‑43 of the Income Tax Assessment Act 1997 applies, may elect that, from 1 July 2004, the section apply to all ordinary income, and statutory income, collected or derived by the society on or after 1 July 2004. Division 420 of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division. Subdivision 615‑C of the Income Tax Assessment Act 1997 applies to you with the modifications set out in this Subdivision if you chose to obtain a roll‑over involving \*shares or units that: (b) were your trading stock, or revenue assets, at the time immediately before that disposal, redemption or cancellation. (1) Disregard subparagraph 615‑45(a)(ii), and paragraph 615‑45(b), of the Income Tax Assessment Act 1997 if the roll‑over relates to \*shares that were disposed of, redeemed or cancelled. (2) For each of the \*shares in the interposed company that you acquired in return for those of your shares or units in the original entity that were your \*trading stock at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  (2) For the purpose of calculating any profit or loss on a future disposal, cessation of ownership, or other realisation of a \*share in the interposed company that you acquired in return for those of your shares or units in the original entity that were \*revenue assets at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  Subdivision 620‑A of the Income Tax Assessment Act 1997 applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. (1) Part 3‑90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Act (No. 1) 2002 and amended by: (2) Section 713‑50 of the Income Tax Assessment Act 1997 (about factors to consider in determining destination of distribution by non‑fixed trust) applies for the purposes of this Part in the same way as it applies for the purposes of Part 3‑90 of that Act. ### Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly‑owned subsidiary of the entity (the future head company) that became the head company of the group; or (ii) at some time during that period, the entity was a wholly‑owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (ii) it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (1) If a group is a transitional group, its head company may, subject to subsection (3), choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (3) If the choice is to be made after the end of the period mentioned in paragraph (2)(a) and before the end of the day mentioned in paragraph (2)(b), it cannot be made unless each entity in relation to which the conditions in subsection (5) are satisfied has agreed to it being made. (a) the entity (the leaving entity) ceased to be a subsidiary member of the group before the choice was made (in a subsection (3) case) or before the revocation took place (in a subsection (4) case); and (b) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; and (c) the asset had become that of the head company because that section applied when a chosen transitional entity (whether or not the same entity as the leaving entity) became a subsidiary member. Section 716‑855 applies for the purposes of this Division in the same way as that section applies for the purposes of Part 3‑90 of the Income Tax Assessment Act 1997. is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705‑B of that Act and with this Division. 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity Section 701‑10 (cost to head company of assets of joining entity) and subsection 701‑35(4) (setting value of trading stock at tax‑neutral amount) of the Income Tax Assessment Act 1997 do not apply to the assets of a chosen transitional entity. > Note: The fact that the head company inherits the entity’s history under section 701‑5 of that Act when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time. #### 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities (2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non‑chosen subsidiary) is worked out in a special way. (b) for each sub‑group (see subsection (6)) that exists in relation to the non‑chosen subsidiary—the sub‑group’s notional allocable cost amount (see subsection(5)) for the non‑chosen subsidiary. (4) The head company adjusted allocable amount for the non‑chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if; (b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of head company’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub‑group in relation to the non‑chosen subsidiary. (5) For each sub‑group that exists in relation to the non‑chosen subsidiary, there is a sub‑group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non‑chosen subsidiary if: (a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non‑chosen subsidiary and the entities comprising the sub‑group; and (c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub‑group membership interests (see subsection (6)) in relation to the sub‑group, and any such entity held those membership interests during the period when it actually held them; and (d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of chosen transitional entity’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub‑group. (6) If a chosen transitional entity holds membership interests in a non‑chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non‑chosen subsidiary: (a) the chosen transitional entity and each interposed non‑chosen subsidiary comprise a sub‑group in relation to the non‑chosen subsidiary (unless the non‑chosen subsidiary is included in a sub‑group in relation to another non‑chosen subsidiary); and (i) the membership interests that the chosen transitional entity holds directly in the non‑chosen subsidiary or in any of the interposed non‑chosen subsidiaries; (ii) the membership interests that each interposed non‑chosen subsidiary holds directly in the non‑chosen subsidiary or in any of the other interposed non‑chosen subsidiaries. #### 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities If any provision of the Income Tax Assessment Act 1997 would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply. > Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred. (1) This section has effect for the purposes of applying section 705‑70 (step 2 of allocable cost amount) of the Income Tax Assessment Act 1997 in relation to a transitional entity. (2) In spite of subsection 705‑70(1A) of that Act, if the amount of an accounting liability of the transitional entity would be different when it becomes an accounting liability of the transitional group, that difference is not taken into account in working out the amount of the liability. #### 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different (a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset (the roll‑over asset) for which there was: (ii) roll‑over relief under section 40‑340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and (i) became an asset of the head company when the transitional group came into existence because subsection 701‑1(1) (the single entity rule) of that Act applies; or differs at that time from what it would have been if the act, transaction or event that gave rise to the CGT event had not occurred in relation to the roll‑over asset; then the provisions mentioned in subsection (2) apply as if the act, transaction or event had not occurred in relation to the roll‑over asset. (a) the act, transaction or event mentioned in subsection (1) happened before a demerger and in connection with the demerger; and (b) before the transitional group came into existence, at least one of the following entities ceased to be a member of the demerger group because of the demerger: (i) the originating company in relation to the roll‑over, or the transferor in relation to the roll‑over relief, was a foreign resident; and (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as a transitional foreign‑held subsidiary of the group. #### 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets (1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied. (2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset. (a) the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and (b) former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset. (4) The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group. (6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses. #### 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets (b) just before the transitional group came into existence, the entity that became the head company held a pre‑CGT asset; and (d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre‑CGT asset and is held by the head company only because the entity is taken by subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company. (2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence. #### 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity (1) This section provides for an addition to the step 1 amount for working out under section 711‑20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity) that ceases to be a subsidiary member of the transitional group at a time (the leaving time), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701‑1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount for paragraph</span><span> </span><span>(2)(c)</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">If, because of the circumstances described in paragraphs</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(a) and (b):</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">The amount is:</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:180.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following provisions applied to the entity:</span></p><p class="Tablea"><span>(a) former section</span><span> </span><span>61A of the </span><span style="font-style:italic">Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(b) former Subdivision</span><span> </span><span>57</span><span>‑</span><span>I in Schedule</span><span> </span><span>2D to the</span><span style="font-style:italic"> Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(c) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(4) of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td><td style="width:148.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the amount treated as being the cost of the asset under that provision; and</span></p><p class="Tablea"><span>(b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>2</span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following subsections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span><span> applied to the entity:</span></p><p class="Tablea"><span>(a) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(5);</span></p><p class="Tablea"><span>(b) 58</span><span>‑</span><span>70(3)</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The amount treated as being the cost, or the first element of the cost, of the asset under that subsection</span></p></td></tr></tbody></table> ``` (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997, as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="4" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amounts and provisions for different dates of acquisition</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Date of the acquisition</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Amount</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Provision of Division</span><span style="font-weight:bold"> </span><span style="font-weight:bold">58 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> applying to the acquisition and the working out of the amount</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:76.7pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>160</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>220</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>After 30</span><span> </span><span>June 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>First element of the cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subsection</span><span> </span><span>58</span><span>‑</span><span>70(5)</span></p></td></tr></tbody></table> ``` > Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. > Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and ### Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: #### 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70‑45 to 70‑70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420‑51 to 420‑58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (a) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority‑owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority‑owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority‑owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority‑owned entity became a subsidiary member of the group, there was roll‑over relief under section 40‑340 of the Income Tax Assessment Act 1997. (a) while the asset is, because subsection 701‑1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, its tax cost setting amount is taken to be equal to the continuing majority‑owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711‑30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997. (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset becomes that of an entity (a new asset holder) other than the head company because subsection 701‑1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder) acquiring some or all of the membership interests in the new asset holder; and (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset is acquired by another entity (a new asset holder) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll‑over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value asset just before the acquisition; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 #### 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 (b) members of the consolidated group or the MEC group mentioned in subsection 104‑500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701‑1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701‑1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (3) If this section applies, neither subsection 104‑500(4) nor subsection 104‑500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year. ### Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C‑B); and (b) modifies certain rules in Part 3‑90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C‑C). > Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719‑2 and 719‑10 of this Act). 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership #### 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(ii) of that Act (see subsection 719‑2(3) of this Act). (b) a trust (a non‑resident trust) that does not meet the requirements in any item of the table in section 703‑25 of the Income Tax Assessment Act 1997. (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non‑resident company or a non‑resident trust; or Test entity must be a subsidiary member on assumption that non‑resident companies and non‑resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non‑resident company or non‑resident trust were a subsidiary member of the group. (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv). #### 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(iii) of that Act (see subsection 719‑2(3) of this Act). (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C‑10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3). If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C‑10 are met; and (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (ii) an entity that is a transitional foreign‑held indirect subsidiary of the group because of another application of this paragraph; Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign‑held indirect subsidiary would need to have satisfied the set of requirements in either section 701C‑10 or 701C‑15 (1) This Subdivision applies if an entity (the transitional foreign‑held joining entity) that is a transitional foreign‑held subsidiary or a transitional foreign‑held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time) the group comes into existence. (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign‑held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign‑held indirect subsidiary that becomes a subsidiary member at that time takes account of this. (a) section 701‑10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); apply, for the purposes of setting the tax cost of an asset of the transitional foreign‑held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign‑held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. > Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign‑held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign‑held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign‑held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign‑held subsidiary and the other entity. > Note 2: If the transitional foreign‑held joining entity is a transitional foreign‑held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705‑A of the Income Tax Assessment Act 1997, in its application in accordance with Subdivision 705‑B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company. Subsection 701‑35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax‑neutral amount) does not apply to the assets of the transitional foreign‑held joining entity if it is a transitional foreign‑held subsidiary. Section 701‑15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: (a) this section applies to each membership interest in the transitional foreign‑held subsidiary that is held by an entity (an eligible non‑resident) of a kind mentioned in subparagraph 701C‑20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign‑held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701‑1(2) of the Income Tax Assessment Act 1997 applies to the eligible non‑resident in the same way as it applies to the head company. Section 711‑5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: > Note: If the leaving entity is a transitional foreign‑held subsidiary (within the meaning of section 701C‑20 of the Income Tax (Transitional Provisions) Act 1997), this Division will, in accordance with subsection 701‑15(4) of this Act (see section 701C‑40 of the first‑mentioned Act), apply to membership interests that an eligible non‑resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity. (1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707‑C of the Income Tax Assessment Act 1997. (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period. (1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if: (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (d) the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997. (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: (1) The head company of a consolidated group may make a choice in the approved form to apply section 701D‑10 to another entity. (2) However, the head company cannot make that choice if subsection 701D‑10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (a) an asset of the head company because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701‑55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40‑77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40‑77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40‑285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount. (b) after the asset became an asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). > Note: The final entity will be different from the head company if an entity (the leaving entity) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40‑285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. > Note: The final entity will be entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701‑5 (the entry history rule) of that Act and perhaps also section 701‑40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity) became a subsidiary member of the group; and It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). > Note: In some cases, section 705‑47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40‑285(3) of this Act. If: (b) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and subsection 40‑285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701‑10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997. > Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997. (1) For the purposes of Part 3‑90 of the Income Tax Assessment Act 1997, this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960‑G of that Act whether the interest or right is a membership interest of the entity in the other entity. > Note: Under Subdivision 960‑G of the Income Tax Assessment Act 1997, a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001) apply to transactions in relation to the interest or right at the relevant time. Despite the amendments of section 703‑35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) If an entity (the joining entity) to which section 40‑75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time), this Subdivision applies in relation to: (ii) became assets of the head company of the group at the joining time because of section 701‑1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure. (1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). (2) If the joining entity could not deduct an amount under Subdivision 40‑B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701‑55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40‑35, 40‑37, 40‑40 or 40‑43 treated the joining entity as holding a notional asset. > Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705‑30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. (a) deductions under former Subdivision 330‑A, 330‑C or 330‑H of the Income Tax Assessment Act 1997, or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated an entity as holding because of the expenditure. (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); > Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40‑75(4) of this Act, but may have been reset since under Subdivision 40‑B of the Income Tax Assessment Act 1997. > Note 2: The effective life of a notional asset is specified by whichever one of sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act is relevant to the notional asset. (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (9) Section 705‑55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705‑45 of that Act. > Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705‑40 of the Income Tax Assessment Act 1997. (a) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701‑5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. > Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705‑305(3). (ii) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707‑A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member. 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value #### 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707‑320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor) other than the real loss‑maker mentioned in subsection 707‑315(1) of that Act for the bundle; and (b) both the real loss‑maker and the value donor became members of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (ca) neither the real loss‑maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (ii) a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (ii) section 713‑540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (2) It must have been possible for the real loss‑maker to have transferred the loss to the value donor under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss‑maker at the initial transfer time the amount worked out using the formula:  > Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707‑327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss‑maker to the transferee. > total of real loss‑maker’s non‑foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss‑makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) included in a bundle of losses: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. #### 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value (1) This section affects the calculation of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707‑325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936, in the bundle). > Note: This section does not affect the calculation of the real loss‑maker’s modified market value for other purposes (such as the real loss‑maker being a value donor for the purposes of another application of section 707‑325 of this Act). (3) One condition is that the event was an injection of capital directly into the real loss‑maker by the value donor mentioned in section 707‑325 of this Act. (c) that would have caused subsection 707‑325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss‑maker’s modified market value (even if no other events described in subsection 707‑325(4) of that Act had occurred), apart from this section. (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss‑maker (whether or not the event also involved either the value donor or the real loss‑maker); or (1) This section has effect for the purposes of working out under Subdivision 707‑C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707‑325, as if there were added to the modified market value of the real loss‑maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (c) the loss is not a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707‑A of that Act at the initial transfer time had the company: > Note: This section has effect even if the amount added to the real loss‑maker’s modified market value under section 707‑325 is nil because the value donor’s modified market value is nil. (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707‑325, as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (4) If the transferee mentioned in subsection 707‑325(1) chooses, sections 707‑310, 707‑335 (except paragraph 707‑335(2)(a)) and 707‑340 of the Income Tax Assessment Act 1997 (and subsections 707‑315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: > Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707‑325(1)(d) and (e) and subsection 707‑325(2) in an application of section 707‑325 separate from the application of that section mentioned in paragraph (1)(a) of this section. > Note: This means that a loss that provided a basis for section 707‑325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. (b) in connection with the requirement that it must have been possible for a company (the notional transferor) to transfer to another company (the notional transferee) for an income year a loss under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997. (b) ends immediately after the initial transfer time mentioned in subsection 707‑320(1) of the Income Tax Assessment Act 1997. > Note: For the purposes of identifying the trial year using the definition in section 707‑120 of the Income Tax Assessment Act 1997, the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time. (1) Subsection (3) of this section affects the calculation, under section 707‑325 of the Income Tax Assessment Act 1997 and section 707‑325 of this Act, of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (the formation time) the group became a consolidated group; and (b) the provisions described in subsection 707‑327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707‑327(1)(b) and (c) of this Act as if the bundle included the loss; and (d) subsection 707‑325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707‑325(1) of this Act chooses that this section apply in relation to the real loss‑maker. (2) Section 707‑325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. (3) Disregard for the purposes of subsection 707‑325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707‑325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or > Note: Disregarding such an event could have a direct or indirect effect on the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss‑maker’s modified market value calculated under section 707‑325 of the Income Tax Assessment Act 1997, if the real loss‑maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707‑325 of this Act to add an amount to the real loss‑maker’s modified market value for those purposes. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) that: (b) was transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from an entity other than the real loss‑maker. (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997. Disregard an event that is described in subsection 707‑325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707‑325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004. (1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss‑maker) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time) the transferee became the head company of a consolidated group; and (ii) the conditions in one or more of paragraphs 165‑15(1)(a), (b) and (c) did not exist in relation to the real loss‑maker; and (da) the real loss‑maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non‑transferred losses) of the same sort that the transferee made without a transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non‑transferred losses). (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. <table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Limit on utilising the losses</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For this income year:</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the losses that the transferee may utilise cannot exceed:</span></p></td></tr></thead><tbody><tr><td style="width:20.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:120.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The first income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span style="font-size:8pt; vertical-align:2pt">1</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The second income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) </span><span style="font-size:8pt; vertical-align:2pt">2</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the amount of the losses utilised for the income year mentioned in item</span><span> </span><span>1</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The third income year ending after the initial transfer time, or a later income year</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time</span></p></td></tr></tbody></table> ``` (4) Subdivision 707‑C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707‑A of that Act. > Note: This has 2 effects. First, Subdivision 707‑C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707‑A of that Act). (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). (7) This section does not limit the transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company. In working out when a choice may be made under subsection 707‑325(5), 707‑327(5), 707‑328A(4) or 707‑350(5), ignore losses to which section 713‑535 of the Income Tax Assessment Act 1997 applies. > Note: That section deals with losses transferred under Subdivision 707‑A of that Act from certain wholly‑owned subsidiaries of life insurance companies that are members of a consolidated group. Section 707‑405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act. (1) This section reduces the adjustable value of a notional asset that section 40‑35, 40‑37, 40‑38, 40‑40 or 40‑43 treats the head company of a consolidated group as holding, if: (b) that section treats the leaving entity as holding a notional asset because of section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997. > Note: Section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time. The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences. (1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event) happening involving an entity (the originating entity) and another entity (the recipient entity) if: (a) the event occurs in connection with a life insurance company (the member life insurance company) becoming a member of a consolidated group; and (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest) in a company or in another trust. (a) a life insurance company transfers an asset (also the original asset) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320‑200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset) to its segregated exempt assets where, apart from this Subdivision, section 320‑255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event) is made in connection with the life insurance company (also the member life insurance company) becoming a member of a consolidated group. (1) This Subdivision applies only if the originating entity (for a section 713‑505 case) or the life insurance company (for a section 713‑510 case) chooses that it apply. (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713‑510 of the Income Tax Assessment Act 1997; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713‑510 of the Income Tax Assessment Act 1997; and (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs. This Act, and the Income Tax Assessment Act 1997, apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group. (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain) that the originating entity would have made as a result of the deferral event is disregarded; and (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount) under paragraph 320‑15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (1) This section operates if, after the deferral event happens, another event (the new event) happens where the new event is: (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (i) the original asset being transferred to or from the company’s virtual PST under section 320‑180, 320‑185 or 320‑195 of the Income Tax Assessment Act 1997; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320‑235, 320‑240 or 320‑250 of that Act; or (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. > Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713‑505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (1) For a section 713‑505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713‑535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: (a) an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group at a time (the leaving time); and (b) but for the cessation of membership and section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision. Sections 716‑340 and 716‑345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. <table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:345.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Extended operation of sections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 1</span><br><span style="font-weight:bold">Sections</span><span style="font-weight:bold"> </span><span style="font-weight:bold">716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">340 and 716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">345 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> operate in relation to:</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 2</span><br><span style="font-weight:bold">In the same way as they operate in relation to:</span></p></td></tr></thead><tbody><tr><td style="width:5.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:161.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>46</span><span>‑</span><span>90 of that Act</span></p></td><td style="width:156.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>40</span><span>‑</span><span>455 of that Act</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software pool created under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure allocated to a software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Software, expenditure on which was in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>In</span><span>‑</span><span>house software, expenditure on the development of which is allocated to a software development pool</span></p></td></tr></tbody></table> ``` (1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: Section 703‑30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004. (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time) a wholly‑owned subsidiary of the entity that became the head company of the group (the head entity), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier‑1 company of the group at the formation time. Despite the amendment of section 719‑30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) Section 719‑160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719‑160(3) of the Income Tax Assessment Act 1997. (3) However, that effect of section 719‑160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division. (2) Paragraphs 701‑1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier‑1 company at the time the MEC group came into existence. (a) the entity and one or more other entities were members of a potential MEC group as eligible tier‑1 companies, throughout the period: (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier‑1 company, at the time the transitional group came into existence. To avoid doubt, sections 707‑325 and 707‑327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719‑305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707‑A of that Act. Subsection 719‑325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006. (1) A reference in an agreement to item 25 of the table in subsection 721‑10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: (1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: Division 725 applies to a scheme entered into on or after 1 July 2002. It also applies to a scheme entered into on or after 27 June 2002, but only if: ### Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (1) Division 727, as inserted by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 and amended by the New Business Tax System (Consolidation and Other Measures) Act 2003, applies to a scheme entered into on or after 1 July 2002. (b) a presumed indirect value shift that happens under the scheme and affects a realisation event that happens on or after 1 July 2002. (a) the economic benefits taken into account in determining that the scheme has resulted in that indirect value shift or presumed indirect value shift include economic benefits provided by: > Note: In that case, the consequences of the trigger event are worked out under Division 138 or 139 of the Income Tax Assessment Act 1997: see items 13 and 14 of Schedule 15 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002. (1) An indirect value shift does not have consequences under Division 727 of the Income Tax Assessment Act 1997 if, to the extent of at least 95% of their total market value, the greater benefits consist entirely of: (a) a right to have services that are covered by section 727‑240 of that Act provided directly by the losing entity to the gaining entity; or (d) if the losing entity’s 2002‑2003 income year ends before 30 June 2003—the start of the losing entity’s 2004‑2005 income year. (2) For the purposes of section 727‑850 (about a presumed indirect value shift affecting a realisation event) of the Income Tax Assessment Act 1997, subsection (1) of this section applies to the presumed indirect value shift: #### 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (2) Paragraph 727‑470(2)(a) of the Income Tax Assessment Act 1997 (as in force immediately before the commencement of this section) continues to have effect in relation to the indirect value shift as if the repeals and amendments made by Schedule 1, Parts 1 and 2 of Schedule 3 and Schedule 8 to the Tax Laws Amendment (Small Business) Act 2007 had not been made. ## Division 70 Trading stock 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years ## 70‑1 Application of Division 70 of the I 70‑1 Application of Division 70 of the Income Tax Assessment Act 1997 (1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act. <table cellspacing="0" cellpadding="0" style="margin-left:56.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:258.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Application provisions for specific sections</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-size:9pt; font-weight:bold">Item</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">This section of the </span><span style="font-size:9pt; font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-size:9pt; font-weight:bold"> ...</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">Applies as described in this provision of this Act ...</span></p></td></tr></thead><tbody><tr><td style="width:24.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55(1)</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>95</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>8</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td></tr></tbody></table> ``` ## 70‑10 Accounting for your disposal of it 70‑10 Accounting for your disposal of items that stop being trading stock because of the change of definition (a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and (b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997. > Note: Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year. (b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997; sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997). > Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock. (3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997. (a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and (b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936; > Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal. ## 70‑20 Application of section 70‑20 of th 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 #### 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997. ## 70‑55 Cost of live stock acquired by nat 70‑55 Cost of live stock acquired by natural increase (1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year. (2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936. (3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year: (a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners; (b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed. > Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year. > Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year. ## 70‑70 Valuing interests in FIFs on hand 70‑70 Valuing interests in FIFs on hand at the start of 1991‑92 (b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year; the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year. (2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. (3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2). ## 70‑90 Application of sections 70‑90 and 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business #### 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997. ## 70‑100 Application of section 70‑100 of 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business #### 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business (1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. (2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity. > Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997. ## 70‑105 Application of section 70‑105 of 70‑105 Application of section 70‑105 of the Income Tax Assessment Act 1997 to deaths on or after 1 July 1997 (1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. (2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value. > Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997. ## 70‑115 Application of section 70‑115 of 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years #### 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year. ## Part 2 ‑40—Rules affecting employees and other taxpayers receiving PAYG withholding payments (a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and (2) Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001 (the new Act) applies to the plant on this basis: (a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant’s opening adjustable value; and (b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and (c) if you excluded an amount from your assessable income under section 42‑290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999—the cost of the plant, and its opening adjustable value, are reduced by that amount; and (d) if subparagraph (1)(b)(ii) applies to you—you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi‑owner of the plant under the former Act continue. (3) If you were using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis: (a) for the diminishing value method—replace the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate you were using; and (i) replace the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate you were using; and (ii) increase the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note 1: Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced. > Note 2: Small business entities can choose to work out the decline in value of their depreciating assets under Division 328. (a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or (3) If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40‑70(1) or 40‑75(1) of the new Act that includes the plant’s effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and (2) For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets. (3) For a case where the plant is merged into another depreciating asset, section 40‑125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it. (b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and (a) you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and (b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU’s opening adjustable value. (1) Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001. (2) For a unit of software for which you were deducting amounts under Subdivision 46‑B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis: (d) you must use the same effective life you were using under Subdivision 46‑B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001. (1) This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day. (b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and (c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and (1) This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001. > Note: Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8). (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330‑80 of the former Act for your income year ending on 30 June 2001; and (c) in applying the formula in section 40‑75 of the new Act for the income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The remaining effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these: (i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and (ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (7) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and (b) the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of expenditure incurred in carrying on eligible quarrying operations—the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (i) you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day) after 30 June 2001; or (ii) the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day) after 30 June 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which the start day occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year. there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (1) This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330‑H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and (c) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (i) any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset); (i) any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (4) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (4) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (b) the expenditure would have been transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330‑H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for your income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (1) Despite subsections 40‑35(5), 40‑38(5) and 40‑40(4), there is no additional decline in the value of the notional asset referred to in those subsections if: (a) apart from this section, subsection 40‑35(5), 40‑38(5) or 40‑40(4) would apply because the real asset referred to in that subsection is disposed of; and (a) at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373‑35 of the former Act; and (b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day. (a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and (1) Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time). (2) Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time. (a) you have deducted or can deduct an amount under Subdivision 387‑G of the former Act for an amount (the qualifying amount) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and (b) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and (1) This section applies to you if you have deducted or can deduct an amount under Subdivision 400‑A of the former Act for an amount (the qualifying amount) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400‑A of the former Act. (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and (c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400‑15(3) of the former Act; and (1) Units of plant that you had allocated to a pool under Subdivision 42‑L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act. (a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and (c) in applying the formula in section 40‑70 of the new Act for your income year in which 1 July 2001 occurs—it has a base value equal to that opening adjustable value; and (d) you replace the component in the formula in subsection 40‑70(1) of the new Act that includes an asset’s effective life with the pool percentage you were using for the pool; and (e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40‑115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and (f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset. (3) An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item). > Note 1: You work out the decline in value of an item removed under this subsection under Subdivision 40‑B of the new Act, using the cost for it worked out under section 40‑205 of the new Act. (b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset. (2) The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year) in this way: (a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and (b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section. (a) for a unit of plant (including IRUs and expenditure on software that is not pooled)—its undeducted cost at the end of 30 June 2001; or (b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence—the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or (c) for transport capital expenditure—the entity’s amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or (d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (e) for expenditure on evaluating the impact on the environment of a project—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (f) for assets that were pooled under Subdivision 42‑M or 42‑L of the former Act—the closing balance of the pool at the end of 30 June 2001. (4) The asset’s base value for applying the formula in section 40‑70 of the new Act for the diminishing value method is that opening adjustable value. (5) The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an item of plant for which you were using the prime cost method—using the rules in section 40‑10 of this Act; and (c) for a unit of software for which the entity was deducting amounts under Subdivision 46‑B of the former Act—using the rules in subsection 40‑25(2) of this Act; and (f) for an amount of expenditure on evaluating the impact on the environment of a project—using the rules in section 40‑55 of this Act. (6) The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an amount of unrecouped expenditure under Division 330 of the former Act—using the rules in section 40‑35 of this Act; and (b) for an amount of transport capital expenditure under Division 330 of the former Act—using the rules in section 40‑40 of this Act; and (7) The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act. (a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑C of the former Act; or (b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑H of the former Act; or (c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387‑B of the former Act; or (d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; or (e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365. (9) The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001. (10) You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount). (11) You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount. (1) Subsections 40‑65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened: (b) you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act. (a) paragraph 40‑65(6)(a) of the Income Tax Assessment Act 1997 included both events set out in subsection (1) of this section; and (b) subsections 40‑65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events. (1) A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936. (2) An amount you have deducted or can deduct for a water facility under Subdivision 387‑B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40‑F of the new Act. (3) A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936. (a) you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40‑115 (about splitting a depreciating asset) or 40‑125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and (b) it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40‑72 of that Act; (2) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if: (c) it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40‑72 of that Act. (3) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset) before 10 May 2006 if: (b) the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and (d) it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40‑72 of that Act. (a) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you: (b) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001. (2) If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act. (3) Otherwise, Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section. (a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or (b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or (ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life. (1) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001. > Note: If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40\. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997. (1A) Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001. (1B) Subsection (1) applies to a mining, quarrying or prospecting right (the new right) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if: (i) the other company is a member of the same wholly‑owned group as the original holder and was a member of that group just before that day; and (ii) the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer. (1D) Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if: (b) the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001. (a) you acquired, under an interest realignment arrangement, an interest (a new interest) in a mining, quarrying or prospecting right; and (b) the interest was acquired in exchange for one or more other interests (old interests) in other mining, quarrying or prospecting rights; and Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001. (a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or (b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership; the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act. (3) An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that: (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act. (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act. (6) Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243. (7) An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if: (a) you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and (8) The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section. (c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act. (2) Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001. A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act. if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011. (2) The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011. (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset for an income year is the amount worked out under section 40‑130 if: (a) the income year is the year in which you start to use the asset, or have it installed ready for use, for a taxable purpose; and (b) subsection (2) (about businesses with turnover less than $500 million) applies to you for the year and for the income year in which you started to hold the asset (if that was an earlier year); and > Note 1: An effect of paragraph (1)(a) is that this Subdivision only applies to one income year per asset. See also subsection 40‑135(1). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $500 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. Exception—assets for which the decline in value is worked out under section 40‑82 or Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (3) However, this section does not apply to a depreciating asset for an income year if you work out the decline in value of the asset for the income year under any of the following: (1) For the purposes of paragraph 40‑120(1)(c) and section 328‑182, you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you: > Note: Section 328‑182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997. (i) entering into a contract under which you hold the post‑12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑12 March 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post‑12 March 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (8) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (9) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (10) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (1) For the purposes of section 40‑120, the decline in value for the income year in which paragraph 40‑120(1)(a) is satisfied (the current year) is: > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 12 March 2020 to 30 June 2020 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2020 to 30 June 2021. (a) 50% of the asset’s cost as at the end of the current year, disregarding any amount included in the second element of the asset’s cost after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997, assuming its cost were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (3) However, the amount worked out under subsection (2) for an income year cannot be more than the amount that is the asset’s cost for the year. (a) 50% of the sum of the asset’s opening adjustable value for the current year and any amount included in the second element of its cost for that year, disregarding any amount included in that second element after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997 assuming: (ii) for the prime cost method—the component “Asset’s \*cost” in the formula in subsection 40‑75(1) of that Act (as adjusted under that section) were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (b) for the prime cost method—the sum of its opening adjustable value for the income year and any amount included in the second element of its cost for that year. (1) The decline in value of a depreciating asset is not worked out under this Subdivision for an income year if this Subdivision already applied in working out the decline in value of the asset for an income year. (2) For an income year later than the year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (3) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (4) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) You may choose that the decline in value of a particular depreciating asset for an income year, and subsequent income years, is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the first income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. If this Subdivision applies to work out the decline in value of a depreciating asset you hold for an income year, no other provision of this Act or the Income Tax Assessment Act 1997 applies to work out that decline in value. (1) For the purposes of this Subdivision, you are covered by this section for a depreciating asset if, on or before 30 June 2023: (2) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (3) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or Exception—assets for which the decline in value is worked out under Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (a) the asset is allocated to a low‑value pool, or expenditure on the asset is allocated to a software development pool (see Subdivision 40‑E of the Income Tax Assessment Act 1997); or (b) you or another taxpayer has deducted or can deduct amounts for the asset under Subdivision 40‑F of the Income Tax Assessment Act 1997 (about primary production depreciating assets). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $5 billion; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this section. (ii) if the 2019‑20 income year ends on or before 6 October 2020—the sum of your ordinary income (if any) and statutory income (if any) for the 2019‑20 income year; and (c) the sum of the amounts worked out under subsection (3) for the 2016‑17, 2017‑18 and 2018‑19 income years exceeds $100 million. (b) next, work out the cost of each of those assets (including any amounts included in the second element of the asset’s cost at a time that is in the income year); (4) For the purposes of subsection (3), disregard an asset if, at the time you first used the asset, or had it installed ready for use, for a taxable purpose: (a) it was not reasonable to conclude that you would use the asset principally in Australia for the principal purpose of carrying on a business; or (5) For the purposes of paragraph (3)(b), to work out the cost of a depreciating asset that is capital works (see section 43‑20 of the Income Tax Assessment Act 1997): (a) disregard section 40‑45 of that Act and work out the cost of the capital works using Subdivision 40‑C of that Act; and (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under subsection (3) if: (a) where section 40‑155 covers you for the current year (regardless whether section 40‑157 also covers you for the current year)—an exclusion applies to you and the asset for the current year under section 40‑165 (about exclusions for businesses with turnover of $50 million or more); or (ii) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s start time occurs in the current year—the asset’s cost as at the end of the current year, disregarding any amount included in the asset’s cost after 30 June 2023; or (b) if the asset’s start time occurred in an earlier year—the sum of its opening adjustable value for the current year and any amount included in the second element of its cost for the current year, disregarding any amount included in the asset’s cost after 30 June 2023. > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 6 October 2020 to 30 June 2021 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2021 to 30 June 2022. (a) where paragraph 40‑160(2)(a) applies—section 40‑155 would not cover you for the income year if the reference in that section to $5 billion were instead a reference to $50 million; and (i) entering into a contract under which you hold the post‑6 October 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑6 October 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of satisfying paragraph 40‑160(1)(a) for the post‑6 October 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you already satisfied paragraph 40‑160(1)(a) of this Act for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (9) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (1) For the purposes of subsections 40‑160(2) and 40‑170(1A), an exclusion applies to you and an asset for an income year if any of the exclusions in this section applies in relation to the asset. (4) This exclusion applies in relation to the asset if the asset is available for use, at any time in the income year, by any of the following: (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under this section if: (ii) you started to use the asset, or have it installed ready for use, for a taxable purpose in an earlier income year; and (b) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under section 40‑82 of the Income Tax Assessment Act 1997—the amount worked out under subsection (3); or (b) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under Subdivision 40‑BA of this Act—the amount worked out under subsection (4); or Assets affected by section 40‑82 of the Income Tax Assessment Act 1997 (about assets costing less than $150,000, medium sized businesses) (a) the amount that would be the asset’s decline in value for the year under section 40‑82 of the Income Tax Assessment Act 1997, assuming the reference in subparagraph 40‑82(3A)(b)(ii) of that Act to 31 December 2020 were instead a reference to the 2020 budget time; and (a) the amount that would be worked out under paragraph 40‑130(2)(a) or (4)(a) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(a) and (4)(a) to 30 June 2021 were instead references to the 2020 budget time; and (c) the amount that would be worked out under paragraph 40‑130(2)(b) or (4)(b) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(b) and (4)(b) to “the amount worked out under paragraph (a)” were instead references to “the amounts worked out under paragraphs 40‑170(4)(a) and (b)”. (a) the amount that would be the asset’s decline in value for the year under Division 40 of the Income Tax Assessment Act 1997, disregarding any amounts included in the eligible second element worked out under section 40‑175 of this Act for the asset for the year; and The amount worked out under this section (the eligible second element) for a depreciating asset for an income year is the sum of any amounts included in the second element of the asset’s cost at a time that is in both of the following periods: (1) For an income year later than a year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (2) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (3) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) This section applies if the decline in value for a depreciating asset for an income year is worked out under this Subdivision, and at a time (the balancing adjustment time) in a later income year: (i) it becomes not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (b) none of the requirements in paragraphs 40‑295(1)(a), (b) or (c) of the Income Tax Assessment Act 1997 are satisfied in relation to the asset. (2) For the purposes of Subdivision 40‑D of the Income Tax Assessment Act 1997 assume that, at the balancing adjustment time, you stop using the asset, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again. (3) For the purposes of section 40‑180 of the Income Tax Assessment Act 1997 assume that the reference in item 3 of the table in subsection 40‑180(2) of that Act to “because you stop using it for any purpose expecting never to use it again” were instead a reference to “because of section 40‑185 of the Income Tax (Transitional Provisions) Act 1997”. (4) If a balancing adjustment event happens to a depreciating asset you hold because of this section, this Subdivision cannot apply to work out the decline in value of the asset for a later income year. (1) You may choose that the decline in value of a particular depreciating asset for an income year is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year. (1) Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40. (a) you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset: (ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and (4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day. (5) The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if: (i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or (ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and  > sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose. (7) Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens: (a) if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b). (i) an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and (ii) the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and (3) The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount. (a) on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and (c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and (ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal; (2) There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal. (3) Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount. If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997. (a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and (b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and: (i) the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, the R&D entity is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—a clawback amount under section 355‑447 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑466 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. (b) section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions. > Note 2: The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and: (i) the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset; (ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, an R&D entity (the partner) that is a partner in the R&D partnership and is entitled to one or more new law deductions for one or more income years for the asset, is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—a clawback amount under section 355‑449 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑468 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s new law deductions mentioned in paragraph (2)(b) of this section. (4) Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event. > Note: Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions. (1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant. (b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and (3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it. (a) there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and (b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act. (2) The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor. (3) The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and <table cellspacing="0" cellpadding="0" style="width:364.2pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:353.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading" style="page-break-inside:avoid"><span>Conditions for small business taxpayers retaining accelerated rates</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Condition</span></p></td></tr></thead><tbody><tr><td style="width:21.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:321.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>The transferee must have been a small business taxpayer for the income year (the </span><span style="font-weight:bold; font-style:italic">start year</span><span>) that includes the time when the entity first used the plant, or first had it installed ready for use.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>2</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>At that time, neither of these applies:</span></p><p class="Tablea"><span>(a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;</span></p><p class="Tablea"><span>(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection</span><span> </span><span>(5).</span></p></td></tr></tbody></table> ``` (4) For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership. (5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement. (a) for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or (i) replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and (ii) increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).  (b) if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11). (c) that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and (d) that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and (e) that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity. (a) for taxable supplies (if any) the entity makes during the year in the course of carrying on a business—the value (as defined by section 9‑75 of the GST Act) of the supplies; and (b) for other supplies the entity makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies. (1) The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for: (a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (c) for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or (d) for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant. (3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115. (4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain. (5) Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee. (i) the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or (a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and (1) A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act. (2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year. For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if: Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act. (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset): and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply. (i) for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or (ii) for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and (c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act. (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and (2) Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act. The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under: (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on: (2) You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act. (3) A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under: (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and (2) Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act. A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act. The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001. If: (d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act; (a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and (a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and (b) the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and (c) paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997. Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years. (1) For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section. (b) the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (b) that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (1) There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea" style="page-break-after:avoid"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a); and</span></p><p class="Tablea" style="page-break-after:avoid"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (b) disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (f) an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division. (4) If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45‑5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest. (5) If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45‑10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest. Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Disregard the use of the following amounts in determining (for the purposes of Subdivision 50‑A of the Income Tax Assessment Act 1997 whether a fund established before 1 July 1997 operates and pursues its purposes in Australia: Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years. (2) However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date. Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if: (b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time. Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years. 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years (1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act. <table cellspacing="0" cellpadding="0" style="margin-left:56.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:258.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Application provisions for specific sections</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-size:9pt; font-weight:bold">Item</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">This section of the </span><span style="font-size:9pt; font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-size:9pt; font-weight:bold"> ...</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">Applies as described in this provision of this Act ...</span></p></td></tr></thead><tbody><tr><td style="width:24.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55(1)</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>95</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>8</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td></tr></tbody></table> ``` (a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and (b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997. > Note: Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year. (b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997; sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997). > Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock. (3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997. (a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and (b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936; > Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal. #### 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997. (1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year. (2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936. (3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year: (a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners; (b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed. > Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year. > Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year. (b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year; the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year. (2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. (3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2). #### 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997. #### 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business (1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. (2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity. > Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997. (1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. (2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value. > Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997. #### 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year. (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. > Note: Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. > Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given). (5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act). (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment. > Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%. (5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%. (6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.  > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section. (b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4). Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age. Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later. Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies. Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3. (4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997. (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%. > Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986. (5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D. > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. (a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and (b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year). (3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and (2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual: (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income. > Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F. > Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997. > Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997. #### 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 (1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012. (2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies. (3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act. (b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009. (2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if: (i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest; (iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or (i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest; (iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009. (2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time. (4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2): (a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and (b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being: (ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and (c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and (d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if: (i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or (ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and (e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and (i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and (ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and (g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest. (a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced: (i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or (ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and (b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5. (2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right. (3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right. (2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. (3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section. Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years. (1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision. > Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision). > Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936). > Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997. (a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936. (1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936. (2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997. > Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997. (3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and (d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; (f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time. > Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and (d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015. (a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or (4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if: (b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset. The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year. (a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and (1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied: (b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and (d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works). (3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936. Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936. (b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006. (2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement. > Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement. Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual: (b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her. 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act (1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee). (2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year: (3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection. #### 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997. Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936). (2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if: (a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; (a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011); (b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986. > Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section. If: (a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and (b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936; Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995. (1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997. (2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997. (3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997. (4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997. > Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one. Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year: (a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and (b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year; the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation. Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset. (b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section); > Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply. (1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if: (a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and (2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value. (4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value. (a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997. (2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less. (1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936: (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. (1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if: (2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by: (a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or (a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or (2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period. Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year: If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997. (1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002. (2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset. (3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required. (i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and (ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and (c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and (f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997). (a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or (1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:  > total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part. (a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or (2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section. (3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1). (1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences. > Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997. (c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets). (4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act. (5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act. Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement. (a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and (2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time. (a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and (ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs. (2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer. (a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and (b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest; (2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event. (3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly. (4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly. <table cellspacing="0" cellpadding="0" style="width:362.55pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:351.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Creating a CGT asset</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">CGT event number</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Applicable amount</span></p></td></tr></thead><tbody><tr><td style="width:50.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D1</span></p></td><td style="width:290.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the incidental costs the originating company incurred that relate to the CGT event</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D2</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the option</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D3</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the right</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>F1</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred on the grant, renewal or extension of the lease</span></p></td></tr></tbody></table> ``` (5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day. A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision. (a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996. (b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. (b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend. (3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities. (1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company. (2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred. (3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company. (1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of: (2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of: (3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note. (1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised. (b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and (ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act. You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and (b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996. (c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and (c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over. (3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. (a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and (c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and (d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act. (3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division. Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years. A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: (1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day. (2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice. (a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and (b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and (a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and (b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and (c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group. (5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004. (6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection. (1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss): (b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions); and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time: (i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or (e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and (f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and (ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred; (2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if: (a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these: (i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset; (ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and (3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act. (a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and (b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section. (5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of: (a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and (b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset. Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. (ii) that could have been deducted, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the deduction had not been limited by the company’s income for that income year; and (ii) that could have been applied, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the application of the loss had not been limited by the company’s capital gains for that income year. 170‑C Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred #### 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years. #### 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). #### Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997. Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997. If: (a) all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (d) that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and (e) the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place. Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years. > introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament. Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day. #### Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting #### 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B. (1) The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day. (2) No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted. #### 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting (1) Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if: (a) the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and (b) none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount. (2) No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount. (1) This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account. (2) For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. > Note 2: If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60. (3) For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)). (4) For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. (5) The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if: (a) during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and (b) the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section. (a) the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and (b) during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components. (7) For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. (8) Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it: (b) the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component. (9) Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component. (10) For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002: (b) lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination; (c) a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination); (e) the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination); (f) the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination). Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period: 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows: (a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and (i) in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and (ii) in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. > Note: A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002. #### 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002: (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:23.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:87.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A franking surplus</span></p></td><td style="width:220.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.009.png" width="175" height="58" alt="Start formula Amount of the class A franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.010.png" width="190" height="56" alt="Start formula Amount of the class B franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.011.png" width="190" height="56" alt="Start formula Amount of the class C franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` #### 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus): (a) a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Original surplus</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:85.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>class A</span></p></td><td style="width:220.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.012.png" width="169" height="38" alt="Start formula Amount of the original class A surplus times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.013.png" width="169" height="38" alt="Start formula Amount of the original class B surplus times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.014.png" width="169" height="38" alt="Start formula Amount of the original class C surplus times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (4) If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit): (a) a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company. (5) The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking deficit into 1997 Act franking debit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Original deficit</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking debit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(4)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:70.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A</span></p></td><td style="width:235.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.015.png" width="164" height="38" alt="Start formula Amount of the original class A deficit times start fraction 39 over 61 end fraction end formula "></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.016.png" width="164" height="38" alt="Start formula Amount of the original class B deficit times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.017.png" width="164" height="38" alt="Start formula Amount of the original class C deficit times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (2) A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if: (c) the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions. (3) The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if: (b) the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and (1) While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit. (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year. (3) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: > Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act. (1) The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account. (a) a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time; (3) If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if: (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity. #### 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If: the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time. (1) Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections. (2) If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year. Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year. Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year. (5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in: that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement. (6) The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (7) The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (2) The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (3) The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (i) are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and (a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and (b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section. (a) whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and (1) This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002. (a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and (3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded. (1) This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002; (2) If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (3) If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (4) If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. (5) If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows: (a) any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and (i) in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and (ii) in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. #### 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF.  #### 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act). (2) If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus): (a) a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF. (4) If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit): (a) a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF. This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period). (1) The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period: (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (1) The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period. (2) The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner. (3) The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5. (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and (d) the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner; the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received. (3) A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time: (1) A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends. (2) However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period. (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (a) the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed: (d) the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and (e) the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return. (2) The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day. (1) The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period. (2) The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made. Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period. (b) on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax); the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed: (c) the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and (d) the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return. (2) The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day. The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period: If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day. If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and If: (a) a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and (b) the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment; In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment. If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment. The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with. If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953. (1) Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period. (a) the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and (b) the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3); the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on: (c) if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or If: Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax. Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division. If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997. (a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day: (3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002. (a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002: > Note: As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date. (b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997. In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003. (1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year. (a) a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of: (i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time; (iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period; (2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if: (b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time: (ii) the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. > Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. > Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. (7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table: <table cellspacing="0" cellpadding="0" style="width:365.35pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount of the franking credit and the exempting debit</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">If:</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the credit and debit is:</span></p></td></tr></thead><tbody><tr><td style="width:22.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The period starts immediately after 7.30</span><span> </span><span>pm by legal time in the Australian Capital Territory on 13</span><span> </span><span>May 1997</span></p></td><td style="width:141.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Both these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was not in surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>All these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was in surplus at the start of the period;</span></p><p class="Tablea"><span>(c) the surplus in the account at the switch time is greater than the surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the franking surplus in the Australian company’s franking account at the switch time; and</span></p><p class="Tablea"><span>(b) the franking surplus in the Australian company’s franking account at the start of the period</span></p></td></tr></tbody></table> ``` (a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and (b) the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period. Subdivision 235‑I of the Income Tax Assessment Act 1997 applies to assets acquired by the trustee of an instalment trust in: (1) Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years. (2) However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time). (3) The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997. Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997. (2) Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in: (1) Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that: (b) is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose. (a) if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007. > Note: To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997. (b) contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option; the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option. (3) For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5). (4) If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is: (a) the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less (b) the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest. (5) If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is: (6) If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil. (1) If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one. (2) If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year. (3) If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year. (a) for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and (b) for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year: Step 1. Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. Step 2. Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3). Step 3. If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year. > Note: Example: Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75): (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred: (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times: (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate. Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008. (a) the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and (b) the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities: (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (i) the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or (ii) the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and (f) none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made: (i) Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event; (ii) a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year. (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (b) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (c) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year #### 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year (a) the requirements set out in paragraphs 275‑610(1)(a), (b) and (c) of the Income Tax Assessment Act 1997 are satisfied in respect of an amount of non‑arm’s length income of a managed investment trust in relation to an income year; and (b) the managed investment trust became a party to the scheme mentioned in paragraph 275‑610(1)(a) of that Act before the day on which the Bill that became the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 was introduced into the House of Representatives; and Division 276 of the Income Tax Assessment Act 1997 as inserted in that Act by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (the amending Act) applies as set out in subitem 1(1) of Schedule 8 to the amending Act. (b) if the trustee of the trust has made a choice for the purposes of paragraph 1(1)(b) of Schedule 8 to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016—the first income year starting on or after 1 July 2015; or (c) if the trustee of the trust has made a choice for the purposes of subparagraph 276‑10(1)(e)(i) of the Income Tax Assessment Act 1997 in respect of the 2016‑17 income year—that income year. (c) the trust is an AMIT for an income year (the discovery year) that is the starting income year or a later income year. (1) This section applies if the trust has an under or over of a character in the discovery year relating to the base year. (b) if, at a time, the trust sent its members distribution statements for an income year that is prior to the starting income year—assume that the trust sent those members AMMA statements for that income year at that time. (3) For the purposes of Division 276 of the Income Tax Assessment Act 1997, treat the under or over mentioned in subsection (1) as an under or over of the AMIT, in the discovery year relating to the base year, of the character mentioned in that subsection. (a) had the under or over mentioned in subsection (1) been discovered before the starting income year, this Act would have operated to produce a particular effect (the pre‑AMIT scheme effect) for the base year in relation to the amount or amounts reflected in the under or over; and 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT #### 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT (b) working out the amount (if any) of the entity’s capital gain under subsection 104‑70(4) of the Income Tax Assessment Act 1997. (3) For the purpose of working out the amount of the non‑assessable part mentioned in paragraph 104‑70(1)(b), treat the following provisions as being in operation at the time the payment was made: (b) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in paragraph (a). (4) Subsection (3) does not apply to the extent (if any) that the entity, in the income tax return that it lodged for the income year in which the payment was made, included the amount of the payment in its assessable income for that income year. (5) For the purposes of section 118‑20 of the Income Tax Assessment Act 1997, treat this section as being in Part 3‑1 of that Act. (2) The Commissioner cannot amend the entity’s assessment for the income year in which the payment was made in a particular way if: (b) the Commissioner could not amend the assessment in that way if the following provisions were in operation at the time the payment was made: (ii) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in subparagraph (i); and Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82‑10F). (2) The object of this section is to apply (with modifications) provisions limiting deductibility in respect of certain contributions made during the period that: (a) Subdivisions AA and AB of Division 3 of Part III of the Income Tax Assessment Act 1936, as in force just before they were repealed by the Superannuation Legislation Amendment (Simplification) Act 2007; (b) any other provision of the Income Tax Assessment Act 1936, or of any instrument made under that Act, to the extent that it relates to the operation of those Subdivisions; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of those Subdivisions. (b) the deduction limit mentioned in section 82AAC for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (c) the deduction limit mentioned in section 82AAT for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (d) Division 290 of the Income Tax Assessment Act 1997 did not apply to contributions made during the income year mentioned in paragraph (a). (2) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of a defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection and subsection (4), the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 5 September 2006; (b) the defined benefit interest mentioned in paragraph (2)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 5 September 2006, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (2)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (4) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of the defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection, the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 12 May 2009; (b) the defined benefit interest mentioned in paragraph (4)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 12 May 2009, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (4)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (1) The object of this section is to apply (with modifications) provisions relating to excess non‑concessional contributions tax in respect of certain contributions made during the period that: (b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision. (ea) in a case where paragraph 292‑95(1)(b) of that Act would have allowed the contribution mentioned in that paragraph to be made at a time within that period—that paragraph allowed the contribution to be made on or before 30 June 2007; and (f) paragraph 292‑95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and (fa) in a case where subsection 292‑100(2), (4), (7) or (8) of that Act would have allowed the contribution mentioned in that subsection to be made at a time within that period—that subsection allowed the contribution to be made on or before 30 June 2007; and (g) paragraph 292‑100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and (h) contributions made during that period that are covered under section 292‑100 of that Act reduce the person’s CGT cap amount for the 2007‑2008 financial year in accordance with subsection 292‑105(2) of that Act (and despite subsection (1) of that section); and (i) if the conditions in subsection (4) are satisfied—the person’s excess non‑concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and (b) the Commissioner gives the person a transitional release authority under subsection 292‑80A(2) in response to the application; and (c) the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292‑80B within 21 days after the date of the release authority; and (d) the superannuation provider pays the person the amount required under section 292‑80C in relation to the transitional release authority. (b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act). (6) The amount to be included in the first person’s amount of non‑concessional contributions under subparagraph (3)(b)(ii) is the sum of: (a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and (b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made. (c) under Division 295 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)), the contribution is included in the assessable income of the superannuation provider in relation to the superannuation plan to which the contribution is made; and (8) For the purposes of paragraph (7)(b), treat the person as an employee of the other entity if the person would be treated as an employee of the other entity under Division 290 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)). (1) A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007. (2) The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292‑80(3)(b)(i), the person would have excess non‑concessional contributions for the financial year mentioned in paragraph 292‑80(3)(a). (4) For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out: The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 21 days after the date of the release authority. (1) A superannuation provider that has been given a transitional release authority in accordance with section 292‑80B must pay to the person within 30 days after receiving the release authority the least of the following amounts: (a) if the person requests the provider in writing to pay a specified amount in relation to the release authority—that amount; (c) the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person in complying superannuation plans. > Note 1: Section 288‑95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection. > Note 2: Section 288‑100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority. > Note 3: For reporting obligations on the superannuation provider in these circumstances, see section 390‑65 in Schedule 1 to the Taxation Administration Act 1953. (2) The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person in complying superannuation plans. (3) Section 307‑125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section. (a) your non‑concessional contributions cap for the 2015‑2016 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsection 292‑85(7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 applies after the commencement of this section as if: (d) subsection 292‑85(6) of that Act as so amended had been applied (taking into account paragraph (c) of this subsection) for the purposes of working out your non‑concessional contributions cap for the 2016‑2017 financial year. (2) For the purposes of working out your non‑concessional contributions caps for the 2017‑2018 financial year and the 2018‑2019 financial year, if: (a) your non‑concessional contributions cap for the 2016‑2017 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsections 292‑85(6) and (7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 apply after the commencement of this section as if the amount worked out under subsection 292‑85(5) of that Act as so amended were $380,000. (3) To avoid doubt, this section does not affect your non‑concessional contributions cap for any financial year that ended before 1 July 2017. The tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your non‑concessional contributions (see section 292‑90 of the Income Tax Assessment Act 1997) for the financial year. (2) Subject to section 294‑55, the amendments of Division 294 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Treasury Laws Amendment (2017 Measures No. 2) Act 2017 apply on and after 1 July 2017. Despite sections 294‑30 and 294‑140 of the Income Tax Assessment Act 1997 (which are about when you have excess transfer balance), you do not have excess transfer balance in your transfer balance account on any day in the period of 6 months beginning on 1 July 2017 if: (a) the only transfer balance credits in the account in that period arose under item 1 of the table in subsection 294‑25(1) of that Act (which is about superannuation income streams you have just before 1 July 2017); and (b) the sum of those transfer balance credits exceeds your transfer balance cap, but is less than or equal to $1,700,000; and (c) at the end of the period, the sum of all the transfer balance debits arising in your transfer balance account equals or exceeds the amount of the excess from paragraph (b). (1) Despite subsection 294‑10(2), a transfer balance credit arises under item 4 of the table in subsection 294‑25(1) of the Income Tax Assessment Act 1997 only in relation to a borrowing that arises under a contract entered into on or after 1 July 2017. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2017 is treated as if it arose under a contract entered into before 1 July 2017 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) on 1 July 2017, a transfer balance debit arose in your transfer balance account under item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997; and (b) the sum of all the transfer balance credits that arise in your transfer balance account under item 1 of the table in subsection 294‑25(1) of that Act exceeds the amount that would, apart from this section, be the amount of that debit. (2) Despite column 2 of item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997, the amount of the transfer balance debit is instead equal to the sum worked out under paragraph (1)(b) of this section. 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain > The object of this Subdivision is to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the following legislative changes: (a) the introduction of a transfer balance cap (as a result of Schedule 1 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016); (b) the exclusion of transition to retirement income streams (and similar income streams) from being superannuation income streams in the retirement phase (as a result of Schedule 8 to that Act). (a) starting on the start of the day on which the Bill that became the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 was introduced into the House of Representatives; and (a) at the start of the pre‑commencement period, a CGT asset of a fund is a segregated current pension asset of the fund; and (i) at a time (the cessation time) in the pre‑commencement period, the asset ceases to be a segregated current pension asset of the fund; or (ii) at the start of 1 July 2017 (also the cessation time), the asset ceases to be a segregated current pension asset of the fund because it supports a superannuation income stream covered by subsection 307‑80(3) of the Income Tax Assessment Act 1997; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (b) the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year is greater than nil; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and #### 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑115(3)(a), the fund makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the fund’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Subsection 295‑390(1) of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). > 2016‑17 non‑exempt proportion means 1 minus the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year. #### 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset (i) the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997 in respect of the trust for the 2016‑17 income year; (ii) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year; and (d) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and #### 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑125(3)(a), the trust makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the trust’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Section 295‑400 of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). (a) unless paragraph (b) applies—1 minus the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997; or (b) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage worked out by subtracting the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year from 100%. This Subdivision applies to an entity that is the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust. For the purposes of this Subdivision, an asset is a 30 June 1988 asset of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust if the entity owned it at the end of 30 June 1988. > Note: Section 295‑90 of the Income Tax Assessment Act 1997 treats these assets as having been acquired on 30 June 1988. (1) The first element of the cost base of each 30 June 1988 asset of the entity’s is the greater of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). (2) The first element of the reduced cost base of each 30 June 1988 asset of the entity’s is the lesser of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). the market value of the asset as at the end of 30 June 1988 is the average of the highest and lowest trade prices for identical assets recorded on 30 June 1988 in whichever of the following markets is applicable: (d) if, on that date, there was a State capital city market (other than the Sydney market) that recorded a higher volume of trading than the Sydney market in identical assets—that State capital city market; (2) For the purposes of this section, an asset is taken to have been listed on an Australian stock exchange on 30 June 1988 if, and only if, on that day the asset had the status of having been granted official quotation by a securities exchange within the meaning of the former Securities Industry Act 1980 or the law of a State or Territory corresponding to that former Act. (b) at any time during the period commencing at the time when the shares were acquired and ending at the end of 30 June 1988, the company paid an amount that was not a dividend to the entity in respect of the shares; (b) at any time during the period commencing at the time when the interest or unit was acquired and ending at the end of 30 June 1988, the trustee of the trust paid an amount to the entity in respect of the interest or unit, being: (i) in a case where the entity was exempt from tax for the year of income in which the payment was made—an amount that, if the entity had not been exempt from tax, would not have been the entity’s assessable income; or the cost base to the entity of the interest or unit as at 30 June 1988 is reduced by so much of the amount as is not attributable to a deduction allowed under former Division 10C or 10D of the Income Tax Assessment Act 1936. (1) Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (2) and (3) of this section apply if an entity exercises rights or options as mentioned in that section to acquire: (b) the greater of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (b) the lesser of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (4) The payment referred to in subsection (2) or (3) can include giving property. To the extent that the payment does, use the market value of the property in working out the amount of the payment. (1) A notice given under subsection 82AAT(1A) or (1CB) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑170 of the Income Tax Assessment Act 1997. (2) A notice given under subsection 82AAT(1C) or (1CD) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑180 of the Income Tax Assessment Act 1997. (1) A proportion of the ordinary income and statutory income of a continuously complying fixed interest ADF of an income year that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).  > Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the income year. > Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the income year. (4) A choice for the purposes of the definition of reckoning time in subsection (5) must be made on or before the date of lodgment of the income tax return of the ADF for the income year to which the choice relates, or before a later day allowed by the Commissioner. > continuously complying fixed interest ADF, in relation to an income year (the current year), means a fund that is a fixed interest complying ADF in relation to each of the following years: > current 25 May balance, in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time: (b) subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 September 1989 is to be added to the balance; (b) a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that day, made a deposit with the ADF that consisted wholly or partly of the roll‑over (as defined in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 as in force on that day) of an eligible termination payment as so defined, being an eligible termination payment that included a concessional component (as so defined). > fixed interest complying ADF, in relation to a year of income, means a complying ADF where both of the following conditions are satisfied: (a) not less than 90% of the amount that, apart from this section, would be the assessable income of the ADF of the income year (other than non‑arm’s length income or amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997) consists of any one or more of the following: (ii) any profit arising on the disposal, redemption, cancellation or maturity of a CGT asset referred to in paragraph 295‑85(3)(b) of the Income Tax Assessment Act 1997; (iii) an amount included in assessable income under Division 16E of Part III of the Income Tax Assessment Act 1936 (or would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply); (ii) virtual PST life insurance policies (as defined in the Income Tax Assessment Act 1997) issued by a life insurance company. > original 25 May balance, in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988. > reckoning time, in relation to an ADF in relation to an income year, means the beginning of the income year, or such other time during the income year as the ADF chooses in accordance with subsection (4). (6) This section does not apply to an ADF in relation to an income year unless the whole of the benefit that would accrue to the ADF from the application of this section in relation to the income year has been, or can reasonably expected to be, passed on to eligible depositors. An election made by the trustee of a complying superannuation fund under subsection 279(4) of the Income Tax Assessment Act 1936 that had effect for the income year of the fund in which 30 June 2007 occurs continues to have effect as if it had been made under section 295‑465 of the Income Tax Assessment Act 1997. Subdivisions 295‑I (no‑TFN contributions) and 295‑J (Tax offset for no‑TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006‑2007 income year ends on a day (the end day) after 1 July 2007 as if: (b) the entity’s no‑TFN contributions income for the entity’s 2007‑2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007‑2008 income year if the contributions concerned had been made in the entity’s 2007‑2008 income year. (2) Division 301 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section because you are a member of the fund in the same way as it would apply if the payments were superannuation member benefits paid to you from a complying superannuation fund. For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. Subdivision 301‑F of the Income Tax Assessment Act 1997 applies in relation to income years starting on or after 1 July 2007. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to the following in respect of an income year that starts on or before 1 July 2021: (b) the amendments of the Income Tax Assessment (1997 Act) Regulations 2021 made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023. (a) a superannuation benefit (the trigger benefit) was paid to a person in the 2020‑21 income year or an earlier income year; and (c) the trigger benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; and (2) The Commissioner cannot amend an assessment on the basis that a superannuation benefit paid to the person is a superannuation income stream benefit because of the amendments made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 if: (iii) the superannuation benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (a) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (b) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. (1) The Minister may, by legislative instrument, make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions) that: (a) relate to the amendments or repeals made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023; and (2) Without limiting subsection (1), rules made under this section before the end of the period of 12 months starting on the day that Schedule commences may provide that provisions of that Schedule, or any other Act or instrument, have effect with any modifications prescribed by the rules. Those provisions then have effect as if they were so modified. (2) Division 302 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section after another person’s death, because the other person was a member of that fund, in the same way as it would apply if the payments were superannuation death benefits paid to you from a complying superannuation fund. For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if: (b) just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. (2) For the purposes of Subdivision 82‑B of Division 82, Division 302 and section 303‑5 of the Income Tax Assessment Act 1997, the definition of death benefits dependant in section 302‑195 of that Act applies as if paragraphs (a) and (b) of the definition were replaced with the following paragraphs: (a) a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008 or a person who was formerly such a spouse; or (b) a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008, who is aged less than 18. (ii) a superannuation guarantee payment, a small superannuation account payment, an unclaimed money payment, a superannuation co‑contribution benefit payment or a superannuation annuity payment. (2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you at a time in the period: (i) a condition of release specified in item 107A or 207AA of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; or (ii) a condition of release specified in item 109AA of the table in Schedule 2 to the Retirement Savings Accounts Regulations 1997. (1) This section applies to a superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with section 292‑80B. (2) The superannuation benefit is not assessable income and is not exempt income to the extent that it does not exceed the amount mentioned in subsection (3). (3) The amount is the amount of excess non‑concessional contributions stated in the release authority in accordance with paragraph 292‑80A(3)(a), reduced (but not below zero) by the amount of any superannuation benefit that was not assessable income and not exempt income under a previous operation of subsection (2) in relation to the release authority. (4) The superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3). (a) you have an interest in a FIF (within the meaning of Part XI of the Income Tax Assessment Act 1936, as in force just before the commencement of item 37 of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010) (the paying fund); and (b) Subdivision 305‑B of the Income Tax Assessment Act 1997 applies in relation to the paying fund (see section 305‑55 of that Act); and (c) the paying fund transfers an amount to a complying superannuation fund in respect of you during the deduction year; and (d) you choose under section 305‑80 of the Income Tax Assessment Act 1997 that the amount, or part of the amount, is to be treated as assessable income of the complying superannuation fund; and (e) immediately before the transfer happens, there is a post‑FIF abolition surplus (within the meaning of the Income Tax Assessment Act 1936) for the paying fund in relation to you; and For the purposes of the definition of specified roll‑over amount in the Income Tax Assessment Act 1997, treat the taxable component of a directed termination payment (within the meaning of section 82‑10F) as the element untaxed in the fund of a superannuation benefit that is a roll‑over superannuation benefit. (1) This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007. > Note: This section also applies to an income stream replacing an earlier one because of an involuntary roll‑over (see section 307‑127). (2) Despite subsection 307‑125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows: (a) first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007); (b) next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits. The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit. (3) Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened: (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day; (ba) the holder of the superannuation interest is aged 60 or above on 1 July 2007, if none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day. (a) treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and (b) work out the tax free component of the superannuation interest for the purposes of section 307‑125 of the Income Tax Assessment Act 1997 under subsections (6) and (6A). (i) an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and (ii) the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time; (b) next, work out the unused undeducted purchase price (within the meaning of paragraph (a) of the definition of that term in subsection 27A(1) of the Income Tax Assessment Act 1936 just before the commencement of this section, and disregarding paragraphs (b) and (c) of that definition) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007; (c) next, work out the pre‑July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this section) of the eligible termination payment. (a) at least one superannuation income stream benefit was paid from the superannuation income stream before 1 July 1994; or (b) section 27AAAA of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007) applied to the superannuation income stream just before 1 July 2007; (7) For the purposes of paragraph (6)(c), disregard the value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment. (8) If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as: (b) if 1 or more other events mentioned in subsection (3) happened before the commutation—the time just before the earliest of those events happens. (a) references in that section to the later income stream (in relation to a time, or event happening, before the payment of that involuntary roll‑over superannuation benefit) include references to the earlier income stream; and (b) references in that section to the superannuation interest supporting the later income stream (in relation to a time, or event happening, before the payment of that benefit) include references to the earlier interest. (1) This section applies for the purposes of working out the amount of your total superannuation balance just before 1 July 2017. (2) The transfer balance mentioned in paragraph 307‑230(1)(b) of the Income Tax Assessment Act 1997 just before 1 July 2017 is taken to be equal to: (a) the sum of the transfer balance credits (if any) in your transfer balance account just after the start of 1 July 2017; less (b) the sum of the transfer balance debits (if any) arising in your transfer balance account on 1 July 2017 under item 4 of the table in subsection 294‑80(1) of that Act (about payment splits). (1) Section 307‑231 of the Income Tax Assessment Act 1997 applies in relation to borrowings that arise under contracts entered into on or after 1 July 2018. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2018 is treated as if it arose under a contract entered into before 1 July 2018 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) treat a deduction made under former section 279 of the Income Tax Assessment Act 1936 as having been made under section 295‑465 of the Income Tax Assessment Act 1997 instead; and (b) treat a deduction made under former section 279B of the Income Tax Assessment Act 1936 as having been made under section 295‑470 of the Income Tax Assessment Act 1997 instead. If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007‑2008 income year is, despite subsection 307‑345(1), the total of: (b) the amount by which $140,000 exceeds the upper limit for the 2006‑2007 income year (worked out under section 159SG of that Act). Division 316 of the Income Tax Assessment Act 1997 applies in relation to demutualisations occurring on or after 1 July 2008. If: (a) any assets held by the benefit funds of a life insurance company that is a friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a complying superannuation fund; and (b) the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer; the transfer is disregarded for any purposes of the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936. (1) In working out the amount that a life insurance company can deduct, in respect of life insurance policies that are disability policies (other than continuous disability policies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income. (2) In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection (1) applies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company’s liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320‑85(4) of that Act. If: (2) If the life insurance company wishes to include a part of an approved asset in its virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑87(2) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society establishes a virtual PST in the 2000‑01 income year, the calculation of the transfer values of the company’s virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year. (1) Subsection (3) applies for the purposes of subparagraph (b)(i) of the definition of virtual PST life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 259 of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007. (2) Subsection (3) also applies for the purposes of subparagraph (b)(i) of the definition of complying superannuation/FHSA life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 47 of Schedule 7 to the First Home Saver Accounts (Consequential Amendments) Act 2008. (3) Treat an annuity as having been purchased out of a superannuation lump sum or an employment termination payment, if the annuity was purchased: (b) out of an eligible termination payment (within the meaning of the Income Tax Assessment Act 1997, as in force just before the commencement mentioned in subsection (1) of this section). (2) If the life insurance company wishes to include a part of an approved asset in its segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (a) a life insurance company had a liability before 1 July 2000 under a life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and (c) there is a transfer of the company’s assets to the segregated exempt assets to meet that liability or that part of the liability; (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑105(1) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320‑225 of the Income Tax Assessment Act 1997 in the 2000‑01 income year, the calculation of the transfer values of the company’s segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year. Section 322‑25 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Part VC of the Insurance Act 1973 after 17 October 2008. 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you > new Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force after the commencement of this section. > old Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. > STS taxpayer means an STS taxpayer within the meaning of Division 328 of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. #### 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years (1) This section applies for the purpose of working out whether you are a small business entity (other than because of subsection 328‑110(4) of the Income Tax Assessment Act 1997) for the 2007‑08 or 2008‑09 income year. (2) You work out your aggregated turnover for the 2005‑06 or 2006‑07 income year as if the amendments made by Schedule 1 to the Tax Laws Amendment (Small Business) Act 2007 had been in force in relation to that year. (a) your aggregated turnover for the 2005‑06 income year (worked out in accordance with subsection (2)) is $2 million or more; but (b) your STS group turnover for that year (worked out under Subdivision 328‑F of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section) is less than $2 million. (2) The following provisions apply as if you are a small business entity for the income year in which you are winding up the business: #### 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you (1) For the purpose of working out whether you are a small business entity for the 2007‑08, 2008‑09, 2009‑10 or 2010‑11 income year (each a relevant income year) for the purposes of a provision to which subsection (3) applies: (2) An entity (the first entity) controls a discretionary trust for a relevant income year if, for any of the 4 income years (a previous income year) before that year: (a) if the previous income year is before the 2007‑08 income year—the trustee of the trust made a distribution of $100,000 or more to the first entity, any of its affiliates, or the first entity and any of its affiliates; or (i) the trustee of the trust paid to, or applied for the benefit of, the first entity, any of the first entity’s affiliates, or the first entity and any of its affiliates, any of the income or capital of the trust; and (ii) the percentage (the control percentage) of the income or capital paid or applied is at least 40% of the total amount of income or capital paid or applied by the trustee for that year. (1) This section sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (2) This section also sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (3) Any ordinary income that, apart from paragraph 328‑105(1)(a) of the Income Tax Assessment Act 1997 (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have derived before the changeover year (while you were using the STS accounting method) and you have not included in your assessable income because you have not received it is included in your assessable income for the changeover year. (4) Any general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, that, apart from paragraph 328‑105(1)(b) of that Act (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have incurred before the changeover year (while you were using the STS accounting method) and that you have not deducted because you have not paid them can be deducted for the changeover year. (b) for any later income year for which you are a small business entity but only if you used the STS accounting method for the income year before that later year. > Note: Example: You are a small business entity for the 2007‑08 and 2008‑09 income years and you continue to use the STS accounting method for those years. You are not a small business entity for the 2009‑10 income year so you cannot continue to use the STS accounting method for that year. Because you cannot use the STS accounting method for the 2009‑10 income year, you will not be able to use it again for a later income year even if you are a small business entity for that later year. In sections 328‑115 and 328‑120, STS accounting method means the accounting method that was required by the Income Tax Assessment Act 1997 to be used by STS taxpayers for the 2004‑05 income year. (b) you made a choice under subsection 328‑175(3) of old Subdivision 328‑D in relation to a depreciating asset you use to carry on a primary production business and for which you could deduct amounts under Subdivision 40‑F or 40‑G of the Income Tax Assessment Act 1997. (2) In determining whether you can choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997 in an increased access year, disregard subsection 328‑175(10) of that Act. (3) In applying paragraph 328‑175(10)(b) of that Act for the purpose of determining whether you can choose to use that Subdivision in any income year after the increased access years, disregard: (4) Paragraph 328‑180(1)(b) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that paragraph to $1,000: (i) first used the asset, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (i) first used the asset, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (i) first used the asset, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, on or after 1 July 2023 and on or before 30 June 2026. (a) a reference in that paragraph to the end of the income year in which you start to use the asset, or have it installed ready for use, for a taxable purpose were a reference to the earlier of: if: (i) first used the asset, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021. (5) Paragraph 328‑180(2)(a) or (3)(a) of the Income Tax Assessment Act 1997 applies to an amount included in the second element of the cost of an asset as if a reference in that paragraph to $1,000: (5A) For the purposes of determining whether, under subsection 328‑180(2) of the Income Tax Assessment Act 1997, you can deduct, for an income year (the current year), the taxable purpose proportion of an amount included in the second element of the cost of an asset, disregard paragraph (b) of that subsection if: (2) For the purposes of determining whether subsection 328‑180(1) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (b) of that subsection (which sets a limit of $1,000 on the cost of the asset) if, in the period beginning at the 2020 budget time and ending on 30 June 2023, you: (3) For the purposes of determining whether subsection 328‑180(2) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (a) of that subsection (which sets a limit of $1,000 on the amount) if the amount is included in the second element of the cost of the asset at any time in the period beginning at the 2020 budget time and ending on 30 June 2023. (4) In applying paragraph 328‑180(3)(a) of the Income Tax Assessment Act 1997 to an asset, disregard an amount included in the second element of the cost of the asset if the amount is deducted under subsection 328‑180(2) of that Act, as modified by subsection (3) of this section. (5) Section 328‑210 of the Income Tax Assessment Act 1997 applies as if the words “less than $1,000 but” in subsection (1) were disregarded, in relation to a deduction for an income year that ends: Subsection 328‑190(2) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that subsection to 15% were a reference to 57.5% if you are covered by section 40‑125 for the asset (which is about backing business investment). (1) A depreciating asset of yours that had been allocated to your general STS pool is treated as being allocated to your general small business pool. (2) A depreciating asset of yours that had been allocated to your long life STS pool is treated as being allocated to your long life small business pool. (3) If you made a choice, under subsection 328‑185(5) of old Subdivision 328‑D, not to have a depreciating asset allocated to your long life STS pool, the choice has effect for the purposes of subsection 328‑185(5) of new Subdivision 328‑D. (1) This section applies if a depreciating asset of yours is treated as being allocated to your general small business pool or long life small business pool under section 328‑185. (2) The opening pool balance of your general small business pool or long life small business pool for the 2007‑08 income year is taken to be the closing pool balance of your general STS pool or long life STS pool, as the case requires, for the 2006‑07 income year, reduced or increased by any adjustment required under section 328‑225 of new Subdivision 328‑D (about change in the business use of an asset). (a) you were not an STS taxpayer for the 2006‑07 income year (because you stopped being an STS taxpayer before that time); but (b) you are a small business entity for the 2007‑08 income year or a later income year and you choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets for that income year; the opening pool balance of your general small business pool or long life small business pool includes the sum of the taxable purpose proportions of the adjustable values of depreciating assets allocated to the pool under subsection 328‑185(3) of new Subdivision 328‑D for that year. (1) This section applies for the purposes of applying Subdivision 328‑D of the Income Tax Assessment Act 1997 for the 2012‑13 income year and later income years. (2) A depreciating asset that had been allocated to your long life small business pool is treated as being allocated to your general small business pool. (a) the closing pool balance of your general small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under section 328‑225 of that Act; and (b) the closing pool balance of your long life small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under that section. (1) This section applies if you chose to stop being an STS taxpayer for the 2005‑06 income year or the 2006‑07 income year. (2) You cannot choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets until at least 5 years after the income year for which you chose to stop being an STS taxpayer. > Note: Subdivision 328‑D of the Income Tax Assessment Act 1997 continues to apply to depreciating assets that have been allocated to your small business pools even if you are not a small business entity, or do not choose to use that Subdivision, for an income year: see section 328‑220 of that Subdivision. (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct 20% of particular expenditure for your 2023‑24 income year if: (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (d) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑450 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (6) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (ii) if the provider is a registered body of a kind listed in paragraph (2)(b), (c) or (d)—the training is within the provider’s scope of registration for that kind of registered body; and (d) each enrolment, or arrangement, for the provision of the training is made or entered into at or after 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022; and > Note: Paragraphs (b) and (c) mean this section will not apply to expenditure for on‑the‑job training or training provided by you in house. (a) a registered higher education provider (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); (b) a NVR registered training organisation (within the meaning of the National Vocational Education and Training Regulator Act 2011); (c) a registered education and training organisation (within the meaning of the Education and Training Reform Act 2006 (Vic.)); (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct for your 2023‑24 income year an amount that is equal to the sum of: (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (3) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑460 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (4) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (b) you incur the expenditure in the period starting at 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022 and ending at the end of: (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (4) For the purposes of paragraphs (1)(c) and (2)(c), in working out whether you can deduct an amount of expenditure on a depreciating asset, assume that: (b) throughout that effective life, you will use the asset for a taxable purpose to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose. (a) 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑470(1) or (3) applies in relation to the income year; and > Note: The deduction relates to the period of 1 July 2023 to 30 June 2024. An entity may have deducted an amount under paragraph (a) for a previous income year if the entity has a substituted accounting period. (2) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑470 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (3) Sections 8‑10, 40‑215 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (c) you start to use the asset, or have it installed ready for use, for any purpose after 30 June 2023 but before 1 July 2024; and (d) you start to use the asset, or have it installed ready for use, for a taxable purpose at a time (the start time) that is: (e) you are a small business entity, or an entity covered by subsection (4), for the income year that includes the start time; and (h) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) a new reasonably comparable depreciating asset that uses a fossil fuel (other than a use of which that is merely incidental) is available in the market at the start time; (ii) if the asset is being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than the other asset; (iii) if the asset is not being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than a new reasonably comparable depreciating asset that is available in the market at the start time; or (i) a depreciating asset (other than an asset excluded under subsection (6)) that uses electricity, or energy that is generated from a renewable source, to be more energy efficient; (iv) the use of electricity, or energy that is generated from a renewable source, by another depreciating asset to be monitored. (a) the amount is included in the second element of a depreciating asset’s cost under paragraph 40‑190(2)(a) of the Income Tax Assessment Act 1997; and (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (d) you are a small business entity, or an entity covered by subsection (4), for the income year in which the expenditure is incurred; and (i) if the asset could use a fossil fuel (other than a use of which that is merely incidental)—the asset to only use electricity, or energy that is generated from a renewable source; (ii) if the asset uses electricity, or energy that is generated from a renewable source—the asset to be more energy efficient; (g) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) For the purposes of paragraph (1)(b) or (3)(b), in working out whether you can deduct an amount of expenditure assume that: (i) for the purposes of paragraph (1)(b)—to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose; or (ii) for the purposes of paragraph (3)(b)—to the same extent as you use it for a taxable purpose in the income year in which the expenditure is incurred. (b) expenditure (other than expenditure referred to in subparagraph (3)(e)(i)) on an asset that can use a fossil fuel (other than a use of which that is merely incidental); (c) an asset that solely or predominantly generates electricity from a renewable source (for example, photovoltaic cells) or expenditure on such an asset; (d) an asset, or expenditure, being capital works for which you can deduct an amount under Division 43 of the Income Tax Assessment Act 1997; > Note: Subsections (1) and (3) also do not apply to an item of trading stock because such an asset is not a depreciating asset: see section 40‑30 of the Income Tax Assessment Act 1997. A reference in each of the following provisions of the Income Tax Assessment Act 1997 to a registration under section 27A of the Industry Research and Development Act 1986 includes a reference to a registration under former section 39J of that Act: (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) the R&D entity cannot deduct an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from: (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D entity could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:22pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the R&D entity is taken to be able to deduct under subsection 355‑315(2) of the new Act that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the R&D entity’s assessable income for the event year under subsection 355‑315(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 for the asset, the R&D entity is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑446 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the R&D entity is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑465 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: Section 355‑315 of the new Act would otherwise apply for the event in a case where the R&D entity had new law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by an R&D partnership; and (i) the partner can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the partner chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D partnership could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the partner is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:21.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D entity</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D partnership</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the partner is taken to be able to deduct under subsection 355‑525(2) of the new Act the partner’s proportion of that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the partner’s assessable income for the event year under subsection 355‑525(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partner’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if one or more partners (including the partner) in the R&D partnership is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset, the partner is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑448 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the partner is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑467 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s deductions under section 355‑520 of the new Act mentioned in subsection (4A) of this section. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the partner for the event, do so apply to the partner for the event. > Note 1: Section 355‑525 of the new Act would otherwise apply for the event in a case where the partner had new law deductions. Item 7 of the table in subsection 57‑110(2) in Schedule 2D to the Income Tax Assessment Act 1936 applies as if the deduction rules set out in the final column of that item also included former sections 73BA and 73BH of the Income Tax Assessment Act 1936. For the purposes of step 1 of the method statement in subsection 355‑415(2) of the Income Tax Assessment Act 1997, also disregard amounts that have already been taken into account under former subsection 73B(14AA) of the Income Tax Assessment Act 1936 for the R&D entity, the grouped entity and the R&D activities for an earlier income year. (1) This section applies if, apart from former paragraph 73B(10)(a) of the Income Tax Assessment Act 1936, an eligible company could deduct advance R and D expenditure in one or more income years commencing on or after 1 July 2011. > Note: That deduction would be under former section 73B of that Act as that former section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (a) apart from Subdivision H (prepaid expenditure) of Division 3 of Part III of the Income Tax Assessment Act 1936, an eligible company can deduct an amount under former section 73B, 73BA, 73BH, 73QA, 73QB or 73Y of that Act for an income year commencing before 1 July 2011; and (c) apart from former paragraph 73B(10)(a) of that Act, the eligible company could deduct an amount, as a result of that application of that Subdivision, for an income year commencing on or after 1 July 2011. > Note: That deduction would be under that Act as it applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (3) Former paragraph 73B(10)(a) of that Act is taken to apply to those income years commencing on or after 1 July 2011 as if the reference in that former paragraph to section 39J of the Industry Research and Development Act 1986 were a reference to section 27A of that Act. (4) An expression used in this section that is also used in former section 73B of the Income Tax Assessment Act 1936 has the same meaning in this section as it has in that former section. This Subdivision applies to core technology (within the meaning of former section 73B of the Income Tax Assessment Act 1936) if: (a) you incurred core technology expenditure (within the meaning of that former section) in an income year commencing before 1 July 2011 in relation to the core technology under one or more contracts entered into at or after the time referred to in former subsection 73B(12) of that Act; and (b) that expenditure (the undeducted expenditure) cannot be deducted for the last income year commencing before 1 July 2011. (1) This section applies for the purposes of Division 40 of the Income Tax Assessment Act 1997, other than sections 40‑292 and 40‑293 of that Act, if the core technology (the asset) is a depreciating asset. (2) Disregard this section, including its effect on the amount you can deduct under section 40‑25 of that Act for the asset, for the purposes of working out: (3) The asset’s opening adjustable value for the first income year that commences on or after 1 July 2011 (the first new income year) is equal to the amount of the undeducted expenditure. (4) Subsection 40‑75(2) of the Income Tax Assessment Act 1997 applies to the asset as if the first new income year were a change year (within the meaning of that subsection). If the core technology is not a depreciating asset, you can deduct the undeducted expenditure in equal proportions over a period of 5 income years starting in the first income year commencing on or after 1 July 2011. To work out the film component (if any) of your tax loss for the 1997‑98 income year or a later income year, apply former section 375‑805 of the Income Tax Assessment Act 1997. If you incurred a film loss for the purposes of former section 79F (Film losses of 1989‑90 to 1996‑97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989‑90 to 1996‑97 income years, that film loss is the film component of your tax loss for that income year. (1) To work out your film loss (if any) for the purposes of the Income Tax Assessment Act 1997 for the 1989‑90 or a later income year, apply former section 375‑810 of that Act. (2) You can deduct in the 1997‑98 or a later income year your film loss for any of the 1989‑90 to 1996‑97 income years only to the extent that it has not already been deducted. (1) Division 392 of the Income Tax Assessment Act 1997 applies to assessments for the 1998‑99 income year and later income years. (a) it had applied to your assessment for each income year before the 1998‑99 income year for which Division 16 of Part III of the Income Tax Assessment Act 1936 applied in relation to your income; and (b) you had carried on a primary production business during each income year before the 1998‑99 income year when you carried on a business of primary production; and (c) for each income year before the 1998‑99 income year you had a basic taxable income equal to your taxable income for the income year for the purposes of Division 16 of Part III of the Income Tax Assessment Act 1936. > Note: Section 149A of the Income Tax Assessment Act 1936 identifies what your taxable income for an income year is for the purposes of Division 16 of Part III of that Act. Division 392 of the Income Tax Assessment Act 1997 does not apply to your assessment for the 1998‑99 income year or a later income year if you made an election under section 158A (Election that Division not apply) of the Income Tax Assessment Act 1936 relating to an income year before the 1998‑99 income year. 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 A reference in Division 393 of the Income Tax Assessment Act 1997 to a deduction under section 393‑5 of that Act for making a farm management deposit is taken to include a reference to a deduction under section 393‑10 in Schedule 2G to the Income Tax Assessment Act 1936, as in force just before the commencement of this section, if the deposit was made before the 2010‑11 income year. #### 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 (b) the deposit was made with an FMD provider as a result of a request to which section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, applied; the unrecouped FMD deduction in respect of the deposit at that time is equal to the amount of the unrecouped deduction (within the meaning of the former subsection 159GA(3) of the Income Tax Assessment Act 1936) in respect of the deposit immediately before it ceased to be a deposit under the Loan (Income Equalization Deposits) Act 1976. > Note: This means that the unrecouped deduction relating to the deposit under the Loan (Income Equalization Deposits) Act 1976 continues to apply (by becoming an unrecouped FMD deduction) when the deposit is transferred to an FMD provider as a farm management deposit. The Loan (Income Equalization Deposits) Act 1976 was repealed on 22 February 2005. If a beneficiary of a trust was covered by paragraph (c) of the definition of primary producer in section 393‑25 in Schedule 2G to the Income Tax Assessment Act 1936 in the 2009‑10 income year, treat subsection 393‑25(3) of the Income Tax Assessment Act 1997 as having applied to the beneficiary for the purpose of determining the maximum number of choices that the trustee may make under subsection 393‑27(2) of that Act for the 2010‑11 income year. (a) a farm management deposit of an owner was unclaimed moneys for the purposes of section 69 of the Banking Act 1959; and (2) For the purpose of subsection 393‑10(1) of the Income Tax Assessment Act, treat the repaid unclaimed moneys as a repayment of the deposit of the owner. (3) To avoid doubt, the payment of unclaimed moneys to the Commonwealth under section 69 of the Banking Act 1959 is not a repayment of the deposit of the owner for the purposes of Division 393 of the Income Tax Assessment Act 1997. 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 #### 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 If a farm management deposit was made with an FMD provider as a result of a request under section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, then: (a) subsections 393‑40(1) to (4) of the Income Tax Assessment Act 1997 apply as if the day the deposit was made was the day on which the deposit was originally made under the Loan (Income Equalization Deposits) Act 1976; and (1) A copyright collecting society to which section 51‑43 of the Income Tax Assessment Act 1997 applies, may elect that, from 1 July 2004, the section apply to all ordinary income, and statutory income, collected or derived by the society on or after 1 July 2004. Division 420 of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division. Subdivision 615‑C of the Income Tax Assessment Act 1997 applies to you with the modifications set out in this Subdivision if you chose to obtain a roll‑over involving \*shares or units that: (b) were your trading stock, or revenue assets, at the time immediately before that disposal, redemption or cancellation. (1) Disregard subparagraph 615‑45(a)(ii), and paragraph 615‑45(b), of the Income Tax Assessment Act 1997 if the roll‑over relates to \*shares that were disposed of, redeemed or cancelled. (2) For each of the \*shares in the interposed company that you acquired in return for those of your shares or units in the original entity that were your \*trading stock at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  (2) For the purpose of calculating any profit or loss on a future disposal, cessation of ownership, or other realisation of a \*share in the interposed company that you acquired in return for those of your shares or units in the original entity that were \*revenue assets at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  Subdivision 620‑A of the Income Tax Assessment Act 1997 applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. (1) Part 3‑90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Act (No. 1) 2002 and amended by: (2) Section 713‑50 of the Income Tax Assessment Act 1997 (about factors to consider in determining destination of distribution by non‑fixed trust) applies for the purposes of this Part in the same way as it applies for the purposes of Part 3‑90 of that Act. ### Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly‑owned subsidiary of the entity (the future head company) that became the head company of the group; or (ii) at some time during that period, the entity was a wholly‑owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (ii) it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (1) If a group is a transitional group, its head company may, subject to subsection (3), choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (3) If the choice is to be made after the end of the period mentioned in paragraph (2)(a) and before the end of the day mentioned in paragraph (2)(b), it cannot be made unless each entity in relation to which the conditions in subsection (5) are satisfied has agreed to it being made. (a) the entity (the leaving entity) ceased to be a subsidiary member of the group before the choice was made (in a subsection (3) case) or before the revocation took place (in a subsection (4) case); and (b) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; and (c) the asset had become that of the head company because that section applied when a chosen transitional entity (whether or not the same entity as the leaving entity) became a subsidiary member. Section 716‑855 applies for the purposes of this Division in the same way as that section applies for the purposes of Part 3‑90 of the Income Tax Assessment Act 1997. is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705‑B of that Act and with this Division. 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity Section 701‑10 (cost to head company of assets of joining entity) and subsection 701‑35(4) (setting value of trading stock at tax‑neutral amount) of the Income Tax Assessment Act 1997 do not apply to the assets of a chosen transitional entity. > Note: The fact that the head company inherits the entity’s history under section 701‑5 of that Act when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time. #### 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities (2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non‑chosen subsidiary) is worked out in a special way. (b) for each sub‑group (see subsection (6)) that exists in relation to the non‑chosen subsidiary—the sub‑group’s notional allocable cost amount (see subsection(5)) for the non‑chosen subsidiary. (4) The head company adjusted allocable amount for the non‑chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if; (b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of head company’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub‑group in relation to the non‑chosen subsidiary. (5) For each sub‑group that exists in relation to the non‑chosen subsidiary, there is a sub‑group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non‑chosen subsidiary if: (a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non‑chosen subsidiary and the entities comprising the sub‑group; and (c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub‑group membership interests (see subsection (6)) in relation to the sub‑group, and any such entity held those membership interests during the period when it actually held them; and (d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of chosen transitional entity’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub‑group. (6) If a chosen transitional entity holds membership interests in a non‑chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non‑chosen subsidiary: (a) the chosen transitional entity and each interposed non‑chosen subsidiary comprise a sub‑group in relation to the non‑chosen subsidiary (unless the non‑chosen subsidiary is included in a sub‑group in relation to another non‑chosen subsidiary); and (i) the membership interests that the chosen transitional entity holds directly in the non‑chosen subsidiary or in any of the interposed non‑chosen subsidiaries; (ii) the membership interests that each interposed non‑chosen subsidiary holds directly in the non‑chosen subsidiary or in any of the other interposed non‑chosen subsidiaries. #### 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities If any provision of the Income Tax Assessment Act 1997 would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply. > Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred. (1) This section has effect for the purposes of applying section 705‑70 (step 2 of allocable cost amount) of the Income Tax Assessment Act 1997 in relation to a transitional entity. (2) In spite of subsection 705‑70(1A) of that Act, if the amount of an accounting liability of the transitional entity would be different when it becomes an accounting liability of the transitional group, that difference is not taken into account in working out the amount of the liability. #### 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different (a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset (the roll‑over asset) for which there was: (ii) roll‑over relief under section 40‑340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and (i) became an asset of the head company when the transitional group came into existence because subsection 701‑1(1) (the single entity rule) of that Act applies; or differs at that time from what it would have been if the act, transaction or event that gave rise to the CGT event had not occurred in relation to the roll‑over asset; then the provisions mentioned in subsection (2) apply as if the act, transaction or event had not occurred in relation to the roll‑over asset. (a) the act, transaction or event mentioned in subsection (1) happened before a demerger and in connection with the demerger; and (b) before the transitional group came into existence, at least one of the following entities ceased to be a member of the demerger group because of the demerger: (i) the originating company in relation to the roll‑over, or the transferor in relation to the roll‑over relief, was a foreign resident; and (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as a transitional foreign‑held subsidiary of the group. #### 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets (1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied. (2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset. (a) the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and (b) former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset. (4) The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group. (6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses. #### 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets (b) just before the transitional group came into existence, the entity that became the head company held a pre‑CGT asset; and (d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre‑CGT asset and is held by the head company only because the entity is taken by subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company. (2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence. #### 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity (1) This section provides for an addition to the step 1 amount for working out under section 711‑20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity) that ceases to be a subsidiary member of the transitional group at a time (the leaving time), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701‑1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount for paragraph</span><span> </span><span>(2)(c)</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">If, because of the circumstances described in paragraphs</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(a) and (b):</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">The amount is:</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:180.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following provisions applied to the entity:</span></p><p class="Tablea"><span>(a) former section</span><span> </span><span>61A of the </span><span style="font-style:italic">Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(b) former Subdivision</span><span> </span><span>57</span><span>‑</span><span>I in Schedule</span><span> </span><span>2D to the</span><span style="font-style:italic"> Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(c) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(4) of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td><td style="width:148.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the amount treated as being the cost of the asset under that provision; and</span></p><p class="Tablea"><span>(b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>2</span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following subsections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span><span> applied to the entity:</span></p><p class="Tablea"><span>(a) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(5);</span></p><p class="Tablea"><span>(b) 58</span><span>‑</span><span>70(3)</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The amount treated as being the cost, or the first element of the cost, of the asset under that subsection</span></p></td></tr></tbody></table> ``` (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997, as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="4" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amounts and provisions for different dates of acquisition</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Date of the acquisition</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Amount</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Provision of Division</span><span style="font-weight:bold"> </span><span style="font-weight:bold">58 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> applying to the acquisition and the working out of the amount</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:76.7pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>160</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>220</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>After 30</span><span> </span><span>June 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>First element of the cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subsection</span><span> </span><span>58</span><span>‑</span><span>70(5)</span></p></td></tr></tbody></table> ``` > Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. > Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and ### Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: #### 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70‑45 to 70‑70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420‑51 to 420‑58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (a) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority‑owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority‑owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority‑owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority‑owned entity became a subsidiary member of the group, there was roll‑over relief under section 40‑340 of the Income Tax Assessment Act 1997. (a) while the asset is, because subsection 701‑1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, its tax cost setting amount is taken to be equal to the continuing majority‑owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711‑30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997. (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset becomes that of an entity (a new asset holder) other than the head company because subsection 701‑1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder) acquiring some or all of the membership interests in the new asset holder; and (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset is acquired by another entity (a new asset holder) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll‑over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value asset just before the acquisition; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 #### 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 (b) members of the consolidated group or the MEC group mentioned in subsection 104‑500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701‑1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701‑1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (3) If this section applies, neither subsection 104‑500(4) nor subsection 104‑500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year. ### Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C‑B); and (b) modifies certain rules in Part 3‑90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C‑C). > Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719‑2 and 719‑10 of this Act). 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership #### 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(ii) of that Act (see subsection 719‑2(3) of this Act). (b) a trust (a non‑resident trust) that does not meet the requirements in any item of the table in section 703‑25 of the Income Tax Assessment Act 1997. (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non‑resident company or a non‑resident trust; or Test entity must be a subsidiary member on assumption that non‑resident companies and non‑resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non‑resident company or non‑resident trust were a subsidiary member of the group. (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv). #### 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(iii) of that Act (see subsection 719‑2(3) of this Act). (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C‑10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3). If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C‑10 are met; and (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (ii) an entity that is a transitional foreign‑held indirect subsidiary of the group because of another application of this paragraph; Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign‑held indirect subsidiary would need to have satisfied the set of requirements in either section 701C‑10 or 701C‑15 (1) This Subdivision applies if an entity (the transitional foreign‑held joining entity) that is a transitional foreign‑held subsidiary or a transitional foreign‑held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time) the group comes into existence. (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign‑held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign‑held indirect subsidiary that becomes a subsidiary member at that time takes account of this. (a) section 701‑10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); apply, for the purposes of setting the tax cost of an asset of the transitional foreign‑held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign‑held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. > Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign‑held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign‑held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign‑held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign‑held subsidiary and the other entity. > Note 2: If the transitional foreign‑held joining entity is a transitional foreign‑held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705‑A of the Income Tax Assessment Act 1997, in its application in accordance with Subdivision 705‑B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company. Subsection 701‑35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax‑neutral amount) does not apply to the assets of the transitional foreign‑held joining entity if it is a transitional foreign‑held subsidiary. Section 701‑15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: (a) this section applies to each membership interest in the transitional foreign‑held subsidiary that is held by an entity (an eligible non‑resident) of a kind mentioned in subparagraph 701C‑20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign‑held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701‑1(2) of the Income Tax Assessment Act 1997 applies to the eligible non‑resident in the same way as it applies to the head company. Section 711‑5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: > Note: If the leaving entity is a transitional foreign‑held subsidiary (within the meaning of section 701C‑20 of the Income Tax (Transitional Provisions) Act 1997), this Division will, in accordance with subsection 701‑15(4) of this Act (see section 701C‑40 of the first‑mentioned Act), apply to membership interests that an eligible non‑resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity. (1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707‑C of the Income Tax Assessment Act 1997. (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period. (1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if: (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (d) the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997. (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: (1) The head company of a consolidated group may make a choice in the approved form to apply section 701D‑10 to another entity. (2) However, the head company cannot make that choice if subsection 701D‑10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (a) an asset of the head company because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701‑55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40‑77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40‑77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40‑285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount. (b) after the asset became an asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). > Note: The final entity will be different from the head company if an entity (the leaving entity) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40‑285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. > Note: The final entity will be entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701‑5 (the entry history rule) of that Act and perhaps also section 701‑40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity) became a subsidiary member of the group; and It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). > Note: In some cases, section 705‑47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40‑285(3) of this Act. If: (b) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and subsection 40‑285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701‑10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997. > Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997. (1) For the purposes of Part 3‑90 of the Income Tax Assessment Act 1997, this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960‑G of that Act whether the interest or right is a membership interest of the entity in the other entity. > Note: Under Subdivision 960‑G of the Income Tax Assessment Act 1997, a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001) apply to transactions in relation to the interest or right at the relevant time. Despite the amendments of section 703‑35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) If an entity (the joining entity) to which section 40‑75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time), this Subdivision applies in relation to: (ii) became assets of the head company of the group at the joining time because of section 701‑1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure. (1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). (2) If the joining entity could not deduct an amount under Subdivision 40‑B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701‑55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40‑35, 40‑37, 40‑40 or 40‑43 treated the joining entity as holding a notional asset. > Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705‑30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. (a) deductions under former Subdivision 330‑A, 330‑C or 330‑H of the Income Tax Assessment Act 1997, or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated an entity as holding because of the expenditure. (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); > Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40‑75(4) of this Act, but may have been reset since under Subdivision 40‑B of the Income Tax Assessment Act 1997. > Note 2: The effective life of a notional asset is specified by whichever one of sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act is relevant to the notional asset. (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (9) Section 705‑55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705‑45 of that Act. > Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705‑40 of the Income Tax Assessment Act 1997. (a) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701‑5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. > Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705‑305(3). (ii) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707‑A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member. 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value #### 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707‑320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor) other than the real loss‑maker mentioned in subsection 707‑315(1) of that Act for the bundle; and (b) both the real loss‑maker and the value donor became members of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (ca) neither the real loss‑maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (ii) a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (ii) section 713‑540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (2) It must have been possible for the real loss‑maker to have transferred the loss to the value donor under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss‑maker at the initial transfer time the amount worked out using the formula:  > Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707‑327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss‑maker to the transferee. > total of real loss‑maker’s non‑foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss‑makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) included in a bundle of losses: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. #### 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value (1) This section affects the calculation of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707‑325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936, in the bundle). > Note: This section does not affect the calculation of the real loss‑maker’s modified market value for other purposes (such as the real loss‑maker being a value donor for the purposes of another application of section 707‑325 of this Act). (3) One condition is that the event was an injection of capital directly into the real loss‑maker by the value donor mentioned in section 707‑325 of this Act. (c) that would have caused subsection 707‑325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss‑maker’s modified market value (even if no other events described in subsection 707‑325(4) of that Act had occurred), apart from this section. (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss‑maker (whether or not the event also involved either the value donor or the real loss‑maker); or (1) This section has effect for the purposes of working out under Subdivision 707‑C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707‑325, as if there were added to the modified market value of the real loss‑maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (c) the loss is not a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707‑A of that Act at the initial transfer time had the company: > Note: This section has effect even if the amount added to the real loss‑maker’s modified market value under section 707‑325 is nil because the value donor’s modified market value is nil. (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707‑325, as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (4) If the transferee mentioned in subsection 707‑325(1) chooses, sections 707‑310, 707‑335 (except paragraph 707‑335(2)(a)) and 707‑340 of the Income Tax Assessment Act 1997 (and subsections 707‑315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: > Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707‑325(1)(d) and (e) and subsection 707‑325(2) in an application of section 707‑325 separate from the application of that section mentioned in paragraph (1)(a) of this section. > Note: This means that a loss that provided a basis for section 707‑325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. (b) in connection with the requirement that it must have been possible for a company (the notional transferor) to transfer to another company (the notional transferee) for an income year a loss under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997. (b) ends immediately after the initial transfer time mentioned in subsection 707‑320(1) of the Income Tax Assessment Act 1997. > Note: For the purposes of identifying the trial year using the definition in section 707‑120 of the Income Tax Assessment Act 1997, the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time. (1) Subsection (3) of this section affects the calculation, under section 707‑325 of the Income Tax Assessment Act 1997 and section 707‑325 of this Act, of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (the formation time) the group became a consolidated group; and (b) the provisions described in subsection 707‑327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707‑327(1)(b) and (c) of this Act as if the bundle included the loss; and (d) subsection 707‑325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707‑325(1) of this Act chooses that this section apply in relation to the real loss‑maker. (2) Section 707‑325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. (3) Disregard for the purposes of subsection 707‑325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707‑325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or > Note: Disregarding such an event could have a direct or indirect effect on the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss‑maker’s modified market value calculated under section 707‑325 of the Income Tax Assessment Act 1997, if the real loss‑maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707‑325 of this Act to add an amount to the real loss‑maker’s modified market value for those purposes. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) that: (b) was transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from an entity other than the real loss‑maker. (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997. Disregard an event that is described in subsection 707‑325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707‑325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004. (1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss‑maker) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time) the transferee became the head company of a consolidated group; and (ii) the conditions in one or more of paragraphs 165‑15(1)(a), (b) and (c) did not exist in relation to the real loss‑maker; and (da) the real loss‑maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non‑transferred losses) of the same sort that the transferee made without a transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non‑transferred losses). (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. <table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Limit on utilising the losses</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For this income year:</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the losses that the transferee may utilise cannot exceed:</span></p></td></tr></thead><tbody><tr><td style="width:20.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:120.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The first income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span style="font-size:8pt; vertical-align:2pt">1</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The second income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) </span><span style="font-size:8pt; vertical-align:2pt">2</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the amount of the losses utilised for the income year mentioned in item</span><span> </span><span>1</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The third income year ending after the initial transfer time, or a later income year</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time</span></p></td></tr></tbody></table> ``` (4) Subdivision 707‑C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707‑A of that Act. > Note: This has 2 effects. First, Subdivision 707‑C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707‑A of that Act). (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). (7) This section does not limit the transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company. In working out when a choice may be made under subsection 707‑325(5), 707‑327(5), 707‑328A(4) or 707‑350(5), ignore losses to which section 713‑535 of the Income Tax Assessment Act 1997 applies. > Note: That section deals with losses transferred under Subdivision 707‑A of that Act from certain wholly‑owned subsidiaries of life insurance companies that are members of a consolidated group. Section 707‑405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act. (1) This section reduces the adjustable value of a notional asset that section 40‑35, 40‑37, 40‑38, 40‑40 or 40‑43 treats the head company of a consolidated group as holding, if: (b) that section treats the leaving entity as holding a notional asset because of section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997. > Note: Section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time. The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences. (1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event) happening involving an entity (the originating entity) and another entity (the recipient entity) if: (a) the event occurs in connection with a life insurance company (the member life insurance company) becoming a member of a consolidated group; and (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest) in a company or in another trust. (a) a life insurance company transfers an asset (also the original asset) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320‑200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset) to its segregated exempt assets where, apart from this Subdivision, section 320‑255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event) is made in connection with the life insurance company (also the member life insurance company) becoming a member of a consolidated group. (1) This Subdivision applies only if the originating entity (for a section 713‑505 case) or the life insurance company (for a section 713‑510 case) chooses that it apply. (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713‑510 of the Income Tax Assessment Act 1997; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713‑510 of the Income Tax Assessment Act 1997; and (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs. This Act, and the Income Tax Assessment Act 1997, apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group. (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain) that the originating entity would have made as a result of the deferral event is disregarded; and (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount) under paragraph 320‑15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (1) This section operates if, after the deferral event happens, another event (the new event) happens where the new event is: (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (i) the original asset being transferred to or from the company’s virtual PST under section 320‑180, 320‑185 or 320‑195 of the Income Tax Assessment Act 1997; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320‑235, 320‑240 or 320‑250 of that Act; or (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. > Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713‑505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (1) For a section 713‑505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713‑535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: (a) an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group at a time (the leaving time); and (b) but for the cessation of membership and section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision. Sections 716‑340 and 716‑345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. <table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:345.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Extended operation of sections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 1</span><br><span style="font-weight:bold">Sections</span><span style="font-weight:bold"> </span><span style="font-weight:bold">716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">340 and 716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">345 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> operate in relation to:</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 2</span><br><span style="font-weight:bold">In the same way as they operate in relation to:</span></p></td></tr></thead><tbody><tr><td style="width:5.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:161.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>46</span><span>‑</span><span>90 of that Act</span></p></td><td style="width:156.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>40</span><span>‑</span><span>455 of that Act</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software pool created under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure allocated to a software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Software, expenditure on which was in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>In</span><span>‑</span><span>house software, expenditure on the development of which is allocated to a software development pool</span></p></td></tr></tbody></table> ``` (1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: Section 703‑30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004. (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time) a wholly‑owned subsidiary of the entity that became the head company of the group (the head entity), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier‑1 company of the group at the formation time. Despite the amendment of section 719‑30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) Section 719‑160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719‑160(3) of the Income Tax Assessment Act 1997. (3) However, that effect of section 719‑160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division. (2) Paragraphs 701‑1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier‑1 company at the time the MEC group came into existence. (a) the entity and one or more other entities were members of a potential MEC group as eligible tier‑1 companies, throughout the period: (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier‑1 company, at the time the transitional group came into existence. To avoid doubt, sections 707‑325 and 707‑327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719‑305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707‑A of that Act. Subsection 719‑325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006. (1) A reference in an agreement to item 25 of the table in subsection 721‑10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: (1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: Division 725 applies to a scheme entered into on or after 1 July 2002. It also applies to a scheme entered into on or after 27 June 2002, but only if: ### Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (1) Division 727, as inserted by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 and amended by the New Business Tax System (Consolidation and Other Measures) Act 2003, applies to a scheme entered into on or after 1 July 2002. (b) a presumed indirect value shift that happens under the scheme and affects a realisation event that happens on or after 1 July 2002. (a) the economic benefits taken into account in determining that the scheme has resulted in that indirect value shift or presumed indirect value shift include economic benefits provided by: > Note: In that case, the consequences of the trigger event are worked out under Division 138 or 139 of the Income Tax Assessment Act 1997: see items 13 and 14 of Schedule 15 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002. (1) An indirect value shift does not have consequences under Division 727 of the Income Tax Assessment Act 1997 if, to the extent of at least 95% of their total market value, the greater benefits consist entirely of: (a) a right to have services that are covered by section 727‑240 of that Act provided directly by the losing entity to the gaining entity; or (d) if the losing entity’s 2002‑2003 income year ends before 30 June 2003—the start of the losing entity’s 2004‑2005 income year. (2) For the purposes of section 727‑850 (about a presumed indirect value shift affecting a realisation event) of the Income Tax Assessment Act 1997, subsection (1) of this section applies to the presumed indirect value shift: #### 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (2) Paragraph 727‑470(2)(a) of the Income Tax Assessment Act 1997 (as in force immediately before the commencement of this section) continues to have effect in relation to the indirect value shift as if the repeals and amendments made by Schedule 1, Parts 1 and 2 of Schedule 3 and Schedule 8 to the Tax Laws Amendment (Small Business) Act 2007 had not been made. ## Division 82 Pre‑10 May 2006 entitlements to life benefit termination payments ## Subdivision 82 ‑A—Application of Division ## 82‑10 Pre‑10 May 2006 entitlements—trans 82‑10 Pre‑10 May 2006 entitlements—transitional termination payments (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. > Note: Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. > Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given). (5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act). ## Subdivision 82 ‑B—Transitional termination payments: general ## 82‑10A Recipient has reached preservatio 82‑10A Recipient has reached preservation age (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment. > Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%. (5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%. (6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.  > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). ## 82‑10B Lower cap amount 82‑10B Lower cap amount (1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section. (b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4). Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age. Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later. Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies. Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3. (4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997. ## 82‑10C Recipient under preservation age 82‑10C Recipient under preservation age (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%. > Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986. (5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D. > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). ## 82‑10D Upper cap amount 82‑10D Upper cap amount (1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. (a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and (b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year). (3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. ## Subdivision 82 ‑C—Pre‑payment statements ## 82‑10E Transitional termination payments 82‑10E Transitional termination payments—pre‑payment statements ## Subdivision 82 ‑D—Directed termination payments made to superannuation and other entities ## 82‑10F Directed termination payments 82‑10F Directed termination payments (a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and (2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual: (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and ## 82‑10G Directed termination payments not 82‑10G Directed termination payments not assessable income and not exempt income A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income. > Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F. > Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997. > Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997. ## Subdivision 82 ‑E—Pre‑10 May 2006 entitlements and employment termination payments made after 1 July 2012 ## 82‑10H Transitional termination payments 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 #### 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 (1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012. (2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies. (3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act. ## Division 83A Employee share schemes ## Subdivision 83A ‑A—Application of Division 83A of the Income Tax Assessment Act 1997 ## 83A‑5 Application of Division 83A of the 83A‑5 Application of Division 83A of the Income Tax Assessment Act 1997 (b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009. (2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if: (i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest; (iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or (i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest; (iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009. (2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time. (4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2): (a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and (b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being: (ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and (c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and (d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if: (i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or (ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and (e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and (i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and (ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and (g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest. ## Subdivision 83A ‑B—Application of former provisions of the Income Tax Assessment Act 1936 ## 83A‑10 Savings—continued operation of fo 83A‑10 Savings—continued operation of former provisions (a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced: (i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or (ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and (b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5. (2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right. (3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right. ## 83A‑15 Indeterminate rights 83A‑15 Indeterminate rights (2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. (3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section. ## Part 3 ‑1—Capital gains and losses: general topics (a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and (2) Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001 (the new Act) applies to the plant on this basis: (a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant’s opening adjustable value; and (b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and (c) if you excluded an amount from your assessable income under section 42‑290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999—the cost of the plant, and its opening adjustable value, are reduced by that amount; and (d) if subparagraph (1)(b)(ii) applies to you—you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi‑owner of the plant under the former Act continue. (3) If you were using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis: (a) for the diminishing value method—replace the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate you were using; and (i) replace the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate you were using; and (ii) increase the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note 1: Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced. > Note 2: Small business entities can choose to work out the decline in value of their depreciating assets under Division 328. (a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or (3) If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40‑70(1) or 40‑75(1) of the new Act that includes the plant’s effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and (2) For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets. (3) For a case where the plant is merged into another depreciating asset, section 40‑125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it. (b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and (a) you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and (b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU’s opening adjustable value. (1) Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001. (2) For a unit of software for which you were deducting amounts under Subdivision 46‑B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis: (d) you must use the same effective life you were using under Subdivision 46‑B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001. (1) This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day. (b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and (c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and (1) This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001. > Note: Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8). (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330‑80 of the former Act for your income year ending on 30 June 2001; and (c) in applying the formula in section 40‑75 of the new Act for the income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The remaining effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these: (i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and (ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (7) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and (b) the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of expenditure incurred in carrying on eligible quarrying operations—the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (i) you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day) after 30 June 2001; or (ii) the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day) after 30 June 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which the start day occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year. there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (1) This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330‑H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and (c) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (i) any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset); (i) any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (4) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (4) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (b) the expenditure would have been transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330‑H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for your income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (1) Despite subsections 40‑35(5), 40‑38(5) and 40‑40(4), there is no additional decline in the value of the notional asset referred to in those subsections if: (a) apart from this section, subsection 40‑35(5), 40‑38(5) or 40‑40(4) would apply because the real asset referred to in that subsection is disposed of; and (a) at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373‑35 of the former Act; and (b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day. (a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and (1) Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time). (2) Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time. (a) you have deducted or can deduct an amount under Subdivision 387‑G of the former Act for an amount (the qualifying amount) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and (b) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and (1) This section applies to you if you have deducted or can deduct an amount under Subdivision 400‑A of the former Act for an amount (the qualifying amount) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400‑A of the former Act. (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and (c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400‑15(3) of the former Act; and (1) Units of plant that you had allocated to a pool under Subdivision 42‑L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act. (a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and (c) in applying the formula in section 40‑70 of the new Act for your income year in which 1 July 2001 occurs—it has a base value equal to that opening adjustable value; and (d) you replace the component in the formula in subsection 40‑70(1) of the new Act that includes an asset’s effective life with the pool percentage you were using for the pool; and (e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40‑115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and (f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset. (3) An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item). > Note 1: You work out the decline in value of an item removed under this subsection under Subdivision 40‑B of the new Act, using the cost for it worked out under section 40‑205 of the new Act. (b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset. (2) The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year) in this way: (a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and (b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section. (a) for a unit of plant (including IRUs and expenditure on software that is not pooled)—its undeducted cost at the end of 30 June 2001; or (b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence—the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or (c) for transport capital expenditure—the entity’s amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or (d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (e) for expenditure on evaluating the impact on the environment of a project—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (f) for assets that were pooled under Subdivision 42‑M or 42‑L of the former Act—the closing balance of the pool at the end of 30 June 2001. (4) The asset’s base value for applying the formula in section 40‑70 of the new Act for the diminishing value method is that opening adjustable value. (5) The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an item of plant for which you were using the prime cost method—using the rules in section 40‑10 of this Act; and (c) for a unit of software for which the entity was deducting amounts under Subdivision 46‑B of the former Act—using the rules in subsection 40‑25(2) of this Act; and (f) for an amount of expenditure on evaluating the impact on the environment of a project—using the rules in section 40‑55 of this Act. (6) The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an amount of unrecouped expenditure under Division 330 of the former Act—using the rules in section 40‑35 of this Act; and (b) for an amount of transport capital expenditure under Division 330 of the former Act—using the rules in section 40‑40 of this Act; and (7) The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act. (a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑C of the former Act; or (b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑H of the former Act; or (c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387‑B of the former Act; or (d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; or (e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365. (9) The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001. (10) You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount). (11) You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount. (1) Subsections 40‑65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened: (b) you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act. (a) paragraph 40‑65(6)(a) of the Income Tax Assessment Act 1997 included both events set out in subsection (1) of this section; and (b) subsections 40‑65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events. (1) A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936. (2) An amount you have deducted or can deduct for a water facility under Subdivision 387‑B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40‑F of the new Act. (3) A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936. (a) you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40‑115 (about splitting a depreciating asset) or 40‑125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and (b) it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40‑72 of that Act; (2) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if: (c) it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40‑72 of that Act. (3) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset) before 10 May 2006 if: (b) the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and (d) it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40‑72 of that Act. (a) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you: (b) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001. (2) If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act. (3) Otherwise, Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section. (a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or (b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or (ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life. (1) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001. > Note: If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40\. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997. (1A) Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001. (1B) Subsection (1) applies to a mining, quarrying or prospecting right (the new right) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if: (i) the other company is a member of the same wholly‑owned group as the original holder and was a member of that group just before that day; and (ii) the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer. (1D) Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if: (b) the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001. (a) you acquired, under an interest realignment arrangement, an interest (a new interest) in a mining, quarrying or prospecting right; and (b) the interest was acquired in exchange for one or more other interests (old interests) in other mining, quarrying or prospecting rights; and Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001. (a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or (b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership; the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act. (3) An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that: (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act. (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act. (6) Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243. (7) An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if: (a) you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and (8) The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section. (c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act. (2) Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001. A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act. if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011. (2) The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011. (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset for an income year is the amount worked out under section 40‑130 if: (a) the income year is the year in which you start to use the asset, or have it installed ready for use, for a taxable purpose; and (b) subsection (2) (about businesses with turnover less than $500 million) applies to you for the year and for the income year in which you started to hold the asset (if that was an earlier year); and > Note 1: An effect of paragraph (1)(a) is that this Subdivision only applies to one income year per asset. See also subsection 40‑135(1). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $500 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. Exception—assets for which the decline in value is worked out under section 40‑82 or Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (3) However, this section does not apply to a depreciating asset for an income year if you work out the decline in value of the asset for the income year under any of the following: (1) For the purposes of paragraph 40‑120(1)(c) and section 328‑182, you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you: > Note: Section 328‑182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997. (i) entering into a contract under which you hold the post‑12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑12 March 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post‑12 March 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (8) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (9) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (10) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (1) For the purposes of section 40‑120, the decline in value for the income year in which paragraph 40‑120(1)(a) is satisfied (the current year) is: > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 12 March 2020 to 30 June 2020 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2020 to 30 June 2021. (a) 50% of the asset’s cost as at the end of the current year, disregarding any amount included in the second element of the asset’s cost after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997, assuming its cost were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (3) However, the amount worked out under subsection (2) for an income year cannot be more than the amount that is the asset’s cost for the year. (a) 50% of the sum of the asset’s opening adjustable value for the current year and any amount included in the second element of its cost for that year, disregarding any amount included in that second element after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997 assuming: (ii) for the prime cost method—the component “Asset’s \*cost” in the formula in subsection 40‑75(1) of that Act (as adjusted under that section) were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (b) for the prime cost method—the sum of its opening adjustable value for the income year and any amount included in the second element of its cost for that year. (1) The decline in value of a depreciating asset is not worked out under this Subdivision for an income year if this Subdivision already applied in working out the decline in value of the asset for an income year. (2) For an income year later than the year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (3) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (4) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) You may choose that the decline in value of a particular depreciating asset for an income year, and subsequent income years, is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the first income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. If this Subdivision applies to work out the decline in value of a depreciating asset you hold for an income year, no other provision of this Act or the Income Tax Assessment Act 1997 applies to work out that decline in value. (1) For the purposes of this Subdivision, you are covered by this section for a depreciating asset if, on or before 30 June 2023: (2) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (3) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or Exception—assets for which the decline in value is worked out under Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (a) the asset is allocated to a low‑value pool, or expenditure on the asset is allocated to a software development pool (see Subdivision 40‑E of the Income Tax Assessment Act 1997); or (b) you or another taxpayer has deducted or can deduct amounts for the asset under Subdivision 40‑F of the Income Tax Assessment Act 1997 (about primary production depreciating assets). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $5 billion; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this section. (ii) if the 2019‑20 income year ends on or before 6 October 2020—the sum of your ordinary income (if any) and statutory income (if any) for the 2019‑20 income year; and (c) the sum of the amounts worked out under subsection (3) for the 2016‑17, 2017‑18 and 2018‑19 income years exceeds $100 million. (b) next, work out the cost of each of those assets (including any amounts included in the second element of the asset’s cost at a time that is in the income year); (4) For the purposes of subsection (3), disregard an asset if, at the time you first used the asset, or had it installed ready for use, for a taxable purpose: (a) it was not reasonable to conclude that you would use the asset principally in Australia for the principal purpose of carrying on a business; or (5) For the purposes of paragraph (3)(b), to work out the cost of a depreciating asset that is capital works (see section 43‑20 of the Income Tax Assessment Act 1997): (a) disregard section 40‑45 of that Act and work out the cost of the capital works using Subdivision 40‑C of that Act; and (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under subsection (3) if: (a) where section 40‑155 covers you for the current year (regardless whether section 40‑157 also covers you for the current year)—an exclusion applies to you and the asset for the current year under section 40‑165 (about exclusions for businesses with turnover of $50 million or more); or (ii) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s start time occurs in the current year—the asset’s cost as at the end of the current year, disregarding any amount included in the asset’s cost after 30 June 2023; or (b) if the asset’s start time occurred in an earlier year—the sum of its opening adjustable value for the current year and any amount included in the second element of its cost for the current year, disregarding any amount included in the asset’s cost after 30 June 2023. > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 6 October 2020 to 30 June 2021 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2021 to 30 June 2022. (a) where paragraph 40‑160(2)(a) applies—section 40‑155 would not cover you for the income year if the reference in that section to $5 billion were instead a reference to $50 million; and (i) entering into a contract under which you hold the post‑6 October 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑6 October 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of satisfying paragraph 40‑160(1)(a) for the post‑6 October 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you already satisfied paragraph 40‑160(1)(a) of this Act for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (9) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (1) For the purposes of subsections 40‑160(2) and 40‑170(1A), an exclusion applies to you and an asset for an income year if any of the exclusions in this section applies in relation to the asset. (4) This exclusion applies in relation to the asset if the asset is available for use, at any time in the income year, by any of the following: (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under this section if: (ii) you started to use the asset, or have it installed ready for use, for a taxable purpose in an earlier income year; and (b) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under section 40‑82 of the Income Tax Assessment Act 1997—the amount worked out under subsection (3); or (b) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under Subdivision 40‑BA of this Act—the amount worked out under subsection (4); or Assets affected by section 40‑82 of the Income Tax Assessment Act 1997 (about assets costing less than $150,000, medium sized businesses) (a) the amount that would be the asset’s decline in value for the year under section 40‑82 of the Income Tax Assessment Act 1997, assuming the reference in subparagraph 40‑82(3A)(b)(ii) of that Act to 31 December 2020 were instead a reference to the 2020 budget time; and (a) the amount that would be worked out under paragraph 40‑130(2)(a) or (4)(a) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(a) and (4)(a) to 30 June 2021 were instead references to the 2020 budget time; and (c) the amount that would be worked out under paragraph 40‑130(2)(b) or (4)(b) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(b) and (4)(b) to “the amount worked out under paragraph (a)” were instead references to “the amounts worked out under paragraphs 40‑170(4)(a) and (b)”. (a) the amount that would be the asset’s decline in value for the year under Division 40 of the Income Tax Assessment Act 1997, disregarding any amounts included in the eligible second element worked out under section 40‑175 of this Act for the asset for the year; and The amount worked out under this section (the eligible second element) for a depreciating asset for an income year is the sum of any amounts included in the second element of the asset’s cost at a time that is in both of the following periods: (1) For an income year later than a year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (2) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (3) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) This section applies if the decline in value for a depreciating asset for an income year is worked out under this Subdivision, and at a time (the balancing adjustment time) in a later income year: (i) it becomes not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (b) none of the requirements in paragraphs 40‑295(1)(a), (b) or (c) of the Income Tax Assessment Act 1997 are satisfied in relation to the asset. (2) For the purposes of Subdivision 40‑D of the Income Tax Assessment Act 1997 assume that, at the balancing adjustment time, you stop using the asset, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again. (3) For the purposes of section 40‑180 of the Income Tax Assessment Act 1997 assume that the reference in item 3 of the table in subsection 40‑180(2) of that Act to “because you stop using it for any purpose expecting never to use it again” were instead a reference to “because of section 40‑185 of the Income Tax (Transitional Provisions) Act 1997”. (4) If a balancing adjustment event happens to a depreciating asset you hold because of this section, this Subdivision cannot apply to work out the decline in value of the asset for a later income year. (1) You may choose that the decline in value of a particular depreciating asset for an income year is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year. (1) Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40. (a) you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset: (ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and (4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day. (5) The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if: (i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or (ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and  > sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose. (7) Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens: (a) if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b). (i) an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and (ii) the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and (3) The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount. (a) on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and (c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and (ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal; (2) There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal. (3) Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount. If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997. (a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and (b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and: (i) the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, the R&D entity is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—a clawback amount under section 355‑447 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑466 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. (b) section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions. > Note 2: The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and: (i) the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset; (ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, an R&D entity (the partner) that is a partner in the R&D partnership and is entitled to one or more new law deductions for one or more income years for the asset, is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—a clawback amount under section 355‑449 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑468 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s new law deductions mentioned in paragraph (2)(b) of this section. (4) Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event. > Note: Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions. (1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant. (b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and (3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it. (a) there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and (b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act. (2) The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor. (3) The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and <table cellspacing="0" cellpadding="0" style="width:364.2pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:353.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading" style="page-break-inside:avoid"><span>Conditions for small business taxpayers retaining accelerated rates</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Condition</span></p></td></tr></thead><tbody><tr><td style="width:21.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:321.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>The transferee must have been a small business taxpayer for the income year (the </span><span style="font-weight:bold; font-style:italic">start year</span><span>) that includes the time when the entity first used the plant, or first had it installed ready for use.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>2</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>At that time, neither of these applies:</span></p><p class="Tablea"><span>(a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;</span></p><p class="Tablea"><span>(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection</span><span> </span><span>(5).</span></p></td></tr></tbody></table> ``` (4) For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership. (5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement. (a) for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or (i) replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and (ii) increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).  (b) if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11). (c) that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and (d) that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and (e) that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity. (a) for taxable supplies (if any) the entity makes during the year in the course of carrying on a business—the value (as defined by section 9‑75 of the GST Act) of the supplies; and (b) for other supplies the entity makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies. (1) The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for: (a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (c) for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or (d) for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant. (3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115. (4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain. (5) Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee. (i) the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or (a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and (1) A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act. (2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year. For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if: Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act. (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset): and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply. (i) for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or (ii) for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and (c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act. (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and (2) Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act. The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under: (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on: (2) You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act. (3) A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under: (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and (2) Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act. A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act. The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001. If: (d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act; (a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and (a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and (b) the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and (c) paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997. Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years. (1) For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section. (b) the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (b) that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (1) There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea" style="page-break-after:avoid"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a); and</span></p><p class="Tablea" style="page-break-after:avoid"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (b) disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (f) an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division. (4) If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45‑5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest. (5) If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45‑10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest. Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Disregard the use of the following amounts in determining (for the purposes of Subdivision 50‑A of the Income Tax Assessment Act 1997 whether a fund established before 1 July 1997 operates and pursues its purposes in Australia: Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years. (2) However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date. Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if: (b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time. Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years. 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years (1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act. <table cellspacing="0" cellpadding="0" style="margin-left:56.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:258.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Application provisions for specific sections</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-size:9pt; font-weight:bold">Item</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">This section of the </span><span style="font-size:9pt; font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-size:9pt; font-weight:bold"> ...</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">Applies as described in this provision of this Act ...</span></p></td></tr></thead><tbody><tr><td style="width:24.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55(1)</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>95</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>8</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td></tr></tbody></table> ``` (a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and (b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997. > Note: Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year. (b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997; sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997). > Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock. (3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997. (a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and (b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936; > Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal. #### 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997. (1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year. (2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936. (3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year: (a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners; (b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed. > Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year. > Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year. (b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year; the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year. (2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. (3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2). #### 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997. #### 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business (1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. (2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity. > Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997. (1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. (2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value. > Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997. #### 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year. (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. > Note: Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. > Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given). (5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act). (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment. > Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%. (5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%. (6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.  > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section. (b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4). Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age. Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later. Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies. Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3. (4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997. (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%. > Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986. (5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D. > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. (a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and (b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year). (3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and (2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual: (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income. > Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F. > Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997. > Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997. #### 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 (1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012. (2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies. (3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act. (b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009. (2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if: (i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest; (iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or (i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest; (iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009. (2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time. (4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2): (a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and (b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being: (ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and (c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and (d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if: (i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or (ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and (e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and (i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and (ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and (g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest. (a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced: (i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or (ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and (b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5. (2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right. (3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right. (2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. (3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section. Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years. (1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision. > Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision). > Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936). > Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997. (a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936. (1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936. (2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997. > Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997. (3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and (d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; (f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time. > Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and (d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015. (a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or (4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if: (b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset. The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year. (a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and (1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied: (b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and (d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works). (3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936. Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936. (b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006. (2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement. > Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement. Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual: (b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her. 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act (1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee). (2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year: (3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection. #### 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997. Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936). (2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if: (a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; (a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011); (b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986. > Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section. If: (a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and (b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936; Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995. (1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997. (2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997. (3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997. (4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997. > Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one. Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year: (a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and (b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year; the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation. Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset. (b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section); > Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply. (1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if: (a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and (2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value. (4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value. (a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997. (2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less. (1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936: (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. (1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if: (2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by: (a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or (a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or (2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period. Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year: If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997. (1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002. (2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset. (3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required. (i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and (ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and (c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and (f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997). (a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or (1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:  > total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part. (a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or (2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section. (3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1). (1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences. > Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997. (c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets). (4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act. (5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act. Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement. (a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and (2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time. (a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and (ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs. (2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer. (a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and (b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest; (2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event. (3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly. (4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly. <table cellspacing="0" cellpadding="0" style="width:362.55pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:351.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Creating a CGT asset</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">CGT event number</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Applicable amount</span></p></td></tr></thead><tbody><tr><td style="width:50.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D1</span></p></td><td style="width:290.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the incidental costs the originating company incurred that relate to the CGT event</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D2</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the option</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D3</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the right</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>F1</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred on the grant, renewal or extension of the lease</span></p></td></tr></tbody></table> ``` (5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day. A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision. (a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996. (b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. (b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend. (3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities. (1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company. (2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred. (3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company. (1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of: (2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of: (3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note. (1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised. (b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and (ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act. You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and (b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996. (c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and (c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over. (3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. (a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and (c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and (d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act. (3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division. Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years. A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: (1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day. (2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice. (a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and (b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and (a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and (b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and (c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group. (5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004. (6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection. (1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss): (b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions); and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time: (i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or (e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and (f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and (ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred; (2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if: (a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these: (i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset; (ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and (3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act. (a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and (b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section. (5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of: (a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and (b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset. Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. (ii) that could have been deducted, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the deduction had not been limited by the company’s income for that income year; and (ii) that could have been applied, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the application of the loss had not been limited by the company’s capital gains for that income year. 170‑C Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred #### 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years. #### 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). #### Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997. Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997. If: (a) all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (d) that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and (e) the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place. Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years. > introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament. Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day. #### Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting #### 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B. (1) The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day. (2) No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted. #### 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting (1) Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if: (a) the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and (b) none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount. (2) No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount. (1) This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account. (2) For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. > Note 2: If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60. (3) For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)). (4) For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. (5) The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if: (a) during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and (b) the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section. (a) the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and (b) during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components. (7) For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. (8) Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it: (b) the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component. (9) Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component. (10) For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002: (b) lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination; (c) a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination); (e) the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination); (f) the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination). Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period: 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows: (a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and (i) in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and (ii) in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. > Note: A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002. #### 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002: (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:23.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:87.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A franking surplus</span></p></td><td style="width:220.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.009.png" width="175" height="58" alt="Start formula Amount of the class A franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.010.png" width="190" height="56" alt="Start formula Amount of the class B franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.011.png" width="190" height="56" alt="Start formula Amount of the class C franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` #### 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus): (a) a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Original surplus</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:85.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>class A</span></p></td><td style="width:220.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.012.png" width="169" height="38" alt="Start formula Amount of the original class A surplus times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.013.png" width="169" height="38" alt="Start formula Amount of the original class B surplus times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.014.png" width="169" height="38" alt="Start formula Amount of the original class C surplus times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (4) If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit): (a) a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company. (5) The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking deficit into 1997 Act franking debit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Original deficit</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking debit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(4)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:70.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A</span></p></td><td style="width:235.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.015.png" width="164" height="38" alt="Start formula Amount of the original class A deficit times start fraction 39 over 61 end fraction end formula "></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.016.png" width="164" height="38" alt="Start formula Amount of the original class B deficit times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.017.png" width="164" height="38" alt="Start formula Amount of the original class C deficit times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (2) A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if: (c) the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions. (3) The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if: (b) the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and (1) While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit. (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year. (3) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: > Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act. (1) The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account. (a) a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time; (3) If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if: (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity. #### 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If: the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time. (1) Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections. (2) If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year. Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year. Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year. (5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in: that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement. (6) The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (7) The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (2) The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (3) The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (i) are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and (a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and (b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section. (a) whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and (1) This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002. (a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and (3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded. (1) This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002; (2) If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (3) If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (4) If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. (5) If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows: (a) any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and (i) in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and (ii) in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. #### 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF.  #### 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act). (2) If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus): (a) a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF. (4) If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit): (a) a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF. This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period). (1) The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period: (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (1) The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period. (2) The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner. (3) The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5. (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and (d) the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner; the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received. (3) A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time: (1) A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends. (2) However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period. (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (a) the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed: (d) the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and (e) the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return. (2) The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day. (1) The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period. (2) The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made. Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period. (b) on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax); the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed: (c) the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and (d) the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return. (2) The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day. The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period: If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day. If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and If: (a) a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and (b) the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment; In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment. If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment. The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with. If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953. (1) Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period. (a) the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and (b) the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3); the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on: (c) if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or If: Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax. Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division. If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997. (a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day: (3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002. (a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002: > Note: As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date. (b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997. In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003. (1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year. (a) a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of: (i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time; (iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period; (2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if: (b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time: (ii) the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. > Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. > Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. (7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table: <table cellspacing="0" cellpadding="0" style="width:365.35pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount of the franking credit and the exempting debit</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">If:</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the credit and debit is:</span></p></td></tr></thead><tbody><tr><td style="width:22.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The period starts immediately after 7.30</span><span> </span><span>pm by legal time in the Australian Capital Territory on 13</span><span> </span><span>May 1997</span></p></td><td style="width:141.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Both these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was not in surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>All these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was in surplus at the start of the period;</span></p><p class="Tablea"><span>(c) the surplus in the account at the switch time is greater than the surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the franking surplus in the Australian company’s franking account at the switch time; and</span></p><p class="Tablea"><span>(b) the franking surplus in the Australian company’s franking account at the start of the period</span></p></td></tr></tbody></table> ``` (a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and (b) the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period. Subdivision 235‑I of the Income Tax Assessment Act 1997 applies to assets acquired by the trustee of an instalment trust in: (1) Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years. (2) However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time). (3) The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997. Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997. (2) Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in: (1) Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that: (b) is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose. (a) if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007. > Note: To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997. (b) contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option; the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option. (3) For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5). (4) If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is: (a) the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less (b) the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest. (5) If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is: (6) If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil. (1) If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one. (2) If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year. (3) If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year. (a) for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and (b) for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year: Step 1. Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. Step 2. Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3). Step 3. If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year. > Note: Example: Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75): (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred: (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times: (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate. Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008. (a) the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and (b) the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities: (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (i) the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or (ii) the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and (f) none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made: (i) Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event; (ii) a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year. (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (b) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (c) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year #### 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year (a) the requirements set out in paragraphs 275‑610(1)(a), (b) and (c) of the Income Tax Assessment Act 1997 are satisfied in respect of an amount of non‑arm’s length income of a managed investment trust in relation to an income year; and (b) the managed investment trust became a party to the scheme mentioned in paragraph 275‑610(1)(a) of that Act before the day on which the Bill that became the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 was introduced into the House of Representatives; and Division 276 of the Income Tax Assessment Act 1997 as inserted in that Act by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (the amending Act) applies as set out in subitem 1(1) of Schedule 8 to the amending Act. (b) if the trustee of the trust has made a choice for the purposes of paragraph 1(1)(b) of Schedule 8 to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016—the first income year starting on or after 1 July 2015; or (c) if the trustee of the trust has made a choice for the purposes of subparagraph 276‑10(1)(e)(i) of the Income Tax Assessment Act 1997 in respect of the 2016‑17 income year—that income year. (c) the trust is an AMIT for an income year (the discovery year) that is the starting income year or a later income year. (1) This section applies if the trust has an under or over of a character in the discovery year relating to the base year. (b) if, at a time, the trust sent its members distribution statements for an income year that is prior to the starting income year—assume that the trust sent those members AMMA statements for that income year at that time. (3) For the purposes of Division 276 of the Income Tax Assessment Act 1997, treat the under or over mentioned in subsection (1) as an under or over of the AMIT, in the discovery year relating to the base year, of the character mentioned in that subsection. (a) had the under or over mentioned in subsection (1) been discovered before the starting income year, this Act would have operated to produce a particular effect (the pre‑AMIT scheme effect) for the base year in relation to the amount or amounts reflected in the under or over; and 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT #### 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT (b) working out the amount (if any) of the entity’s capital gain under subsection 104‑70(4) of the Income Tax Assessment Act 1997. (3) For the purpose of working out the amount of the non‑assessable part mentioned in paragraph 104‑70(1)(b), treat the following provisions as being in operation at the time the payment was made: (b) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in paragraph (a). (4) Subsection (3) does not apply to the extent (if any) that the entity, in the income tax return that it lodged for the income year in which the payment was made, included the amount of the payment in its assessable income for that income year. (5) For the purposes of section 118‑20 of the Income Tax Assessment Act 1997, treat this section as being in Part 3‑1 of that Act. (2) The Commissioner cannot amend the entity’s assessment for the income year in which the payment was made in a particular way if: (b) the Commissioner could not amend the assessment in that way if the following provisions were in operation at the time the payment was made: (ii) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in subparagraph (i); and Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82‑10F). (2) The object of this section is to apply (with modifications) provisions limiting deductibility in respect of certain contributions made during the period that: (a) Subdivisions AA and AB of Division 3 of Part III of the Income Tax Assessment Act 1936, as in force just before they were repealed by the Superannuation Legislation Amendment (Simplification) Act 2007; (b) any other provision of the Income Tax Assessment Act 1936, or of any instrument made under that Act, to the extent that it relates to the operation of those Subdivisions; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of those Subdivisions. (b) the deduction limit mentioned in section 82AAC for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (c) the deduction limit mentioned in section 82AAT for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (d) Division 290 of the Income Tax Assessment Act 1997 did not apply to contributions made during the income year mentioned in paragraph (a). (2) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of a defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection and subsection (4), the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 5 September 2006; (b) the defined benefit interest mentioned in paragraph (2)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 5 September 2006, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (2)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (4) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of the defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection, the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 12 May 2009; (b) the defined benefit interest mentioned in paragraph (4)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 12 May 2009, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (4)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (1) The object of this section is to apply (with modifications) provisions relating to excess non‑concessional contributions tax in respect of certain contributions made during the period that: (b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision. (ea) in a case where paragraph 292‑95(1)(b) of that Act would have allowed the contribution mentioned in that paragraph to be made at a time within that period—that paragraph allowed the contribution to be made on or before 30 June 2007; and (f) paragraph 292‑95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and (fa) in a case where subsection 292‑100(2), (4), (7) or (8) of that Act would have allowed the contribution mentioned in that subsection to be made at a time within that period—that subsection allowed the contribution to be made on or before 30 June 2007; and (g) paragraph 292‑100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and (h) contributions made during that period that are covered under section 292‑100 of that Act reduce the person’s CGT cap amount for the 2007‑2008 financial year in accordance with subsection 292‑105(2) of that Act (and despite subsection (1) of that section); and (i) if the conditions in subsection (4) are satisfied—the person’s excess non‑concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and (b) the Commissioner gives the person a transitional release authority under subsection 292‑80A(2) in response to the application; and (c) the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292‑80B within 21 days after the date of the release authority; and (d) the superannuation provider pays the person the amount required under section 292‑80C in relation to the transitional release authority. (b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act). (6) The amount to be included in the first person’s amount of non‑concessional contributions under subparagraph (3)(b)(ii) is the sum of: (a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and (b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made. (c) under Division 295 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)), the contribution is included in the assessable income of the superannuation provider in relation to the superannuation plan to which the contribution is made; and (8) For the purposes of paragraph (7)(b), treat the person as an employee of the other entity if the person would be treated as an employee of the other entity under Division 290 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)). (1) A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007. (2) The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292‑80(3)(b)(i), the person would have excess non‑concessional contributions for the financial year mentioned in paragraph 292‑80(3)(a). (4) For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out: The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 21 days after the date of the release authority. (1) A superannuation provider that has been given a transitional release authority in accordance with section 292‑80B must pay to the person within 30 days after receiving the release authority the least of the following amounts: (a) if the person requests the provider in writing to pay a specified amount in relation to the release authority—that amount; (c) the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person in complying superannuation plans. > Note 1: Section 288‑95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection. > Note 2: Section 288‑100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority. > Note 3: For reporting obligations on the superannuation provider in these circumstances, see section 390‑65 in Schedule 1 to the Taxation Administration Act 1953. (2) The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person in complying superannuation plans. (3) Section 307‑125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section. (a) your non‑concessional contributions cap for the 2015‑2016 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsection 292‑85(7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 applies after the commencement of this section as if: (d) subsection 292‑85(6) of that Act as so amended had been applied (taking into account paragraph (c) of this subsection) for the purposes of working out your non‑concessional contributions cap for the 2016‑2017 financial year. (2) For the purposes of working out your non‑concessional contributions caps for the 2017‑2018 financial year and the 2018‑2019 financial year, if: (a) your non‑concessional contributions cap for the 2016‑2017 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsections 292‑85(6) and (7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 apply after the commencement of this section as if the amount worked out under subsection 292‑85(5) of that Act as so amended were $380,000. (3) To avoid doubt, this section does not affect your non‑concessional contributions cap for any financial year that ended before 1 July 2017. The tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your non‑concessional contributions (see section 292‑90 of the Income Tax Assessment Act 1997) for the financial year. (2) Subject to section 294‑55, the amendments of Division 294 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Treasury Laws Amendment (2017 Measures No. 2) Act 2017 apply on and after 1 July 2017. Despite sections 294‑30 and 294‑140 of the Income Tax Assessment Act 1997 (which are about when you have excess transfer balance), you do not have excess transfer balance in your transfer balance account on any day in the period of 6 months beginning on 1 July 2017 if: (a) the only transfer balance credits in the account in that period arose under item 1 of the table in subsection 294‑25(1) of that Act (which is about superannuation income streams you have just before 1 July 2017); and (b) the sum of those transfer balance credits exceeds your transfer balance cap, but is less than or equal to $1,700,000; and (c) at the end of the period, the sum of all the transfer balance debits arising in your transfer balance account equals or exceeds the amount of the excess from paragraph (b). (1) Despite subsection 294‑10(2), a transfer balance credit arises under item 4 of the table in subsection 294‑25(1) of the Income Tax Assessment Act 1997 only in relation to a borrowing that arises under a contract entered into on or after 1 July 2017. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2017 is treated as if it arose under a contract entered into before 1 July 2017 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) on 1 July 2017, a transfer balance debit arose in your transfer balance account under item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997; and (b) the sum of all the transfer balance credits that arise in your transfer balance account under item 1 of the table in subsection 294‑25(1) of that Act exceeds the amount that would, apart from this section, be the amount of that debit. (2) Despite column 2 of item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997, the amount of the transfer balance debit is instead equal to the sum worked out under paragraph (1)(b) of this section. 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain > The object of this Subdivision is to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the following legislative changes: (a) the introduction of a transfer balance cap (as a result of Schedule 1 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016); (b) the exclusion of transition to retirement income streams (and similar income streams) from being superannuation income streams in the retirement phase (as a result of Schedule 8 to that Act). (a) starting on the start of the day on which the Bill that became the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 was introduced into the House of Representatives; and (a) at the start of the pre‑commencement period, a CGT asset of a fund is a segregated current pension asset of the fund; and (i) at a time (the cessation time) in the pre‑commencement period, the asset ceases to be a segregated current pension asset of the fund; or (ii) at the start of 1 July 2017 (also the cessation time), the asset ceases to be a segregated current pension asset of the fund because it supports a superannuation income stream covered by subsection 307‑80(3) of the Income Tax Assessment Act 1997; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (b) the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year is greater than nil; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and #### 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑115(3)(a), the fund makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the fund’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Subsection 295‑390(1) of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). > 2016‑17 non‑exempt proportion means 1 minus the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year. #### 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset (i) the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997 in respect of the trust for the 2016‑17 income year; (ii) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year; and (d) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and #### 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑125(3)(a), the trust makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the trust’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Section 295‑400 of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). (a) unless paragraph (b) applies—1 minus the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997; or (b) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage worked out by subtracting the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year from 100%. This Subdivision applies to an entity that is the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust. For the purposes of this Subdivision, an asset is a 30 June 1988 asset of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust if the entity owned it at the end of 30 June 1988. > Note: Section 295‑90 of the Income Tax Assessment Act 1997 treats these assets as having been acquired on 30 June 1988. (1) The first element of the cost base of each 30 June 1988 asset of the entity’s is the greater of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). (2) The first element of the reduced cost base of each 30 June 1988 asset of the entity’s is the lesser of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). the market value of the asset as at the end of 30 June 1988 is the average of the highest and lowest trade prices for identical assets recorded on 30 June 1988 in whichever of the following markets is applicable: (d) if, on that date, there was a State capital city market (other than the Sydney market) that recorded a higher volume of trading than the Sydney market in identical assets—that State capital city market; (2) For the purposes of this section, an asset is taken to have been listed on an Australian stock exchange on 30 June 1988 if, and only if, on that day the asset had the status of having been granted official quotation by a securities exchange within the meaning of the former Securities Industry Act 1980 or the law of a State or Territory corresponding to that former Act. (b) at any time during the period commencing at the time when the shares were acquired and ending at the end of 30 June 1988, the company paid an amount that was not a dividend to the entity in respect of the shares; (b) at any time during the period commencing at the time when the interest or unit was acquired and ending at the end of 30 June 1988, the trustee of the trust paid an amount to the entity in respect of the interest or unit, being: (i) in a case where the entity was exempt from tax for the year of income in which the payment was made—an amount that, if the entity had not been exempt from tax, would not have been the entity’s assessable income; or the cost base to the entity of the interest or unit as at 30 June 1988 is reduced by so much of the amount as is not attributable to a deduction allowed under former Division 10C or 10D of the Income Tax Assessment Act 1936. (1) Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (2) and (3) of this section apply if an entity exercises rights or options as mentioned in that section to acquire: (b) the greater of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (b) the lesser of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (4) The payment referred to in subsection (2) or (3) can include giving property. To the extent that the payment does, use the market value of the property in working out the amount of the payment. (1) A notice given under subsection 82AAT(1A) or (1CB) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑170 of the Income Tax Assessment Act 1997. (2) A notice given under subsection 82AAT(1C) or (1CD) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑180 of the Income Tax Assessment Act 1997. (1) A proportion of the ordinary income and statutory income of a continuously complying fixed interest ADF of an income year that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).  > Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the income year. > Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the income year. (4) A choice for the purposes of the definition of reckoning time in subsection (5) must be made on or before the date of lodgment of the income tax return of the ADF for the income year to which the choice relates, or before a later day allowed by the Commissioner. > continuously complying fixed interest ADF, in relation to an income year (the current year), means a fund that is a fixed interest complying ADF in relation to each of the following years: > current 25 May balance, in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time: (b) subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 September 1989 is to be added to the balance; (b) a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that day, made a deposit with the ADF that consisted wholly or partly of the roll‑over (as defined in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 as in force on that day) of an eligible termination payment as so defined, being an eligible termination payment that included a concessional component (as so defined). > fixed interest complying ADF, in relation to a year of income, means a complying ADF where both of the following conditions are satisfied: (a) not less than 90% of the amount that, apart from this section, would be the assessable income of the ADF of the income year (other than non‑arm’s length income or amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997) consists of any one or more of the following: (ii) any profit arising on the disposal, redemption, cancellation or maturity of a CGT asset referred to in paragraph 295‑85(3)(b) of the Income Tax Assessment Act 1997; (iii) an amount included in assessable income under Division 16E of Part III of the Income Tax Assessment Act 1936 (or would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply); (ii) virtual PST life insurance policies (as defined in the Income Tax Assessment Act 1997) issued by a life insurance company. > original 25 May balance, in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988. > reckoning time, in relation to an ADF in relation to an income year, means the beginning of the income year, or such other time during the income year as the ADF chooses in accordance with subsection (4). (6) This section does not apply to an ADF in relation to an income year unless the whole of the benefit that would accrue to the ADF from the application of this section in relation to the income year has been, or can reasonably expected to be, passed on to eligible depositors. An election made by the trustee of a complying superannuation fund under subsection 279(4) of the Income Tax Assessment Act 1936 that had effect for the income year of the fund in which 30 June 2007 occurs continues to have effect as if it had been made under section 295‑465 of the Income Tax Assessment Act 1997. Subdivisions 295‑I (no‑TFN contributions) and 295‑J (Tax offset for no‑TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006‑2007 income year ends on a day (the end day) after 1 July 2007 as if: (b) the entity’s no‑TFN contributions income for the entity’s 2007‑2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007‑2008 income year if the contributions concerned had been made in the entity’s 2007‑2008 income year. (2) Division 301 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section because you are a member of the fund in the same way as it would apply if the payments were superannuation member benefits paid to you from a complying superannuation fund. For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. Subdivision 301‑F of the Income Tax Assessment Act 1997 applies in relation to income years starting on or after 1 July 2007. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to the following in respect of an income year that starts on or before 1 July 2021: (b) the amendments of the Income Tax Assessment (1997 Act) Regulations 2021 made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023. (a) a superannuation benefit (the trigger benefit) was paid to a person in the 2020‑21 income year or an earlier income year; and (c) the trigger benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; and (2) The Commissioner cannot amend an assessment on the basis that a superannuation benefit paid to the person is a superannuation income stream benefit because of the amendments made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 if: (iii) the superannuation benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (a) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (b) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. (1) The Minister may, by legislative instrument, make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions) that: (a) relate to the amendments or repeals made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023; and (2) Without limiting subsection (1), rules made under this section before the end of the period of 12 months starting on the day that Schedule commences may provide that provisions of that Schedule, or any other Act or instrument, have effect with any modifications prescribed by the rules. Those provisions then have effect as if they were so modified. (2) Division 302 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section after another person’s death, because the other person was a member of that fund, in the same way as it would apply if the payments were superannuation death benefits paid to you from a complying superannuation fund. For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if: (b) just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. (2) For the purposes of Subdivision 82‑B of Division 82, Division 302 and section 303‑5 of the Income Tax Assessment Act 1997, the definition of death benefits dependant in section 302‑195 of that Act applies as if paragraphs (a) and (b) of the definition were replaced with the following paragraphs: (a) a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008 or a person who was formerly such a spouse; or (b) a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008, who is aged less than 18. (ii) a superannuation guarantee payment, a small superannuation account payment, an unclaimed money payment, a superannuation co‑contribution benefit payment or a superannuation annuity payment. (2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you at a time in the period: (i) a condition of release specified in item 107A or 207AA of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; or (ii) a condition of release specified in item 109AA of the table in Schedule 2 to the Retirement Savings Accounts Regulations 1997. (1) This section applies to a superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with section 292‑80B. (2) The superannuation benefit is not assessable income and is not exempt income to the extent that it does not exceed the amount mentioned in subsection (3). (3) The amount is the amount of excess non‑concessional contributions stated in the release authority in accordance with paragraph 292‑80A(3)(a), reduced (but not below zero) by the amount of any superannuation benefit that was not assessable income and not exempt income under a previous operation of subsection (2) in relation to the release authority. (4) The superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3). (a) you have an interest in a FIF (within the meaning of Part XI of the Income Tax Assessment Act 1936, as in force just before the commencement of item 37 of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010) (the paying fund); and (b) Subdivision 305‑B of the Income Tax Assessment Act 1997 applies in relation to the paying fund (see section 305‑55 of that Act); and (c) the paying fund transfers an amount to a complying superannuation fund in respect of you during the deduction year; and (d) you choose under section 305‑80 of the Income Tax Assessment Act 1997 that the amount, or part of the amount, is to be treated as assessable income of the complying superannuation fund; and (e) immediately before the transfer happens, there is a post‑FIF abolition surplus (within the meaning of the Income Tax Assessment Act 1936) for the paying fund in relation to you; and For the purposes of the definition of specified roll‑over amount in the Income Tax Assessment Act 1997, treat the taxable component of a directed termination payment (within the meaning of section 82‑10F) as the element untaxed in the fund of a superannuation benefit that is a roll‑over superannuation benefit. (1) This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007. > Note: This section also applies to an income stream replacing an earlier one because of an involuntary roll‑over (see section 307‑127). (2) Despite subsection 307‑125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows: (a) first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007); (b) next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits. The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit. (3) Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened: (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day; (ba) the holder of the superannuation interest is aged 60 or above on 1 July 2007, if none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day. (a) treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and (b) work out the tax free component of the superannuation interest for the purposes of section 307‑125 of the Income Tax Assessment Act 1997 under subsections (6) and (6A). (i) an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and (ii) the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time; (b) next, work out the unused undeducted purchase price (within the meaning of paragraph (a) of the definition of that term in subsection 27A(1) of the Income Tax Assessment Act 1936 just before the commencement of this section, and disregarding paragraphs (b) and (c) of that definition) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007; (c) next, work out the pre‑July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this section) of the eligible termination payment. (a) at least one superannuation income stream benefit was paid from the superannuation income stream before 1 July 1994; or (b) section 27AAAA of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007) applied to the superannuation income stream just before 1 July 2007; (7) For the purposes of paragraph (6)(c), disregard the value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment. (8) If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as: (b) if 1 or more other events mentioned in subsection (3) happened before the commutation—the time just before the earliest of those events happens. (a) references in that section to the later income stream (in relation to a time, or event happening, before the payment of that involuntary roll‑over superannuation benefit) include references to the earlier income stream; and (b) references in that section to the superannuation interest supporting the later income stream (in relation to a time, or event happening, before the payment of that benefit) include references to the earlier interest. (1) This section applies for the purposes of working out the amount of your total superannuation balance just before 1 July 2017. (2) The transfer balance mentioned in paragraph 307‑230(1)(b) of the Income Tax Assessment Act 1997 just before 1 July 2017 is taken to be equal to: (a) the sum of the transfer balance credits (if any) in your transfer balance account just after the start of 1 July 2017; less (b) the sum of the transfer balance debits (if any) arising in your transfer balance account on 1 July 2017 under item 4 of the table in subsection 294‑80(1) of that Act (about payment splits). (1) Section 307‑231 of the Income Tax Assessment Act 1997 applies in relation to borrowings that arise under contracts entered into on or after 1 July 2018. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2018 is treated as if it arose under a contract entered into before 1 July 2018 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) treat a deduction made under former section 279 of the Income Tax Assessment Act 1936 as having been made under section 295‑465 of the Income Tax Assessment Act 1997 instead; and (b) treat a deduction made under former section 279B of the Income Tax Assessment Act 1936 as having been made under section 295‑470 of the Income Tax Assessment Act 1997 instead. If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007‑2008 income year is, despite subsection 307‑345(1), the total of: (b) the amount by which $140,000 exceeds the upper limit for the 2006‑2007 income year (worked out under section 159SG of that Act). Division 316 of the Income Tax Assessment Act 1997 applies in relation to demutualisations occurring on or after 1 July 2008. If: (a) any assets held by the benefit funds of a life insurance company that is a friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a complying superannuation fund; and (b) the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer; the transfer is disregarded for any purposes of the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936. (1) In working out the amount that a life insurance company can deduct, in respect of life insurance policies that are disability policies (other than continuous disability policies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income. (2) In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection (1) applies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company’s liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320‑85(4) of that Act. If: (2) If the life insurance company wishes to include a part of an approved asset in its virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑87(2) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society establishes a virtual PST in the 2000‑01 income year, the calculation of the transfer values of the company’s virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year. (1) Subsection (3) applies for the purposes of subparagraph (b)(i) of the definition of virtual PST life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 259 of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007. (2) Subsection (3) also applies for the purposes of subparagraph (b)(i) of the definition of complying superannuation/FHSA life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 47 of Schedule 7 to the First Home Saver Accounts (Consequential Amendments) Act 2008. (3) Treat an annuity as having been purchased out of a superannuation lump sum or an employment termination payment, if the annuity was purchased: (b) out of an eligible termination payment (within the meaning of the Income Tax Assessment Act 1997, as in force just before the commencement mentioned in subsection (1) of this section). (2) If the life insurance company wishes to include a part of an approved asset in its segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (a) a life insurance company had a liability before 1 July 2000 under a life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and (c) there is a transfer of the company’s assets to the segregated exempt assets to meet that liability or that part of the liability; (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑105(1) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320‑225 of the Income Tax Assessment Act 1997 in the 2000‑01 income year, the calculation of the transfer values of the company’s segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year. Section 322‑25 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Part VC of the Insurance Act 1973 after 17 October 2008. 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you > new Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force after the commencement of this section. > old Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. > STS taxpayer means an STS taxpayer within the meaning of Division 328 of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. #### 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years (1) This section applies for the purpose of working out whether you are a small business entity (other than because of subsection 328‑110(4) of the Income Tax Assessment Act 1997) for the 2007‑08 or 2008‑09 income year. (2) You work out your aggregated turnover for the 2005‑06 or 2006‑07 income year as if the amendments made by Schedule 1 to the Tax Laws Amendment (Small Business) Act 2007 had been in force in relation to that year. (a) your aggregated turnover for the 2005‑06 income year (worked out in accordance with subsection (2)) is $2 million or more; but (b) your STS group turnover for that year (worked out under Subdivision 328‑F of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section) is less than $2 million. (2) The following provisions apply as if you are a small business entity for the income year in which you are winding up the business: #### 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you (1) For the purpose of working out whether you are a small business entity for the 2007‑08, 2008‑09, 2009‑10 or 2010‑11 income year (each a relevant income year) for the purposes of a provision to which subsection (3) applies: (2) An entity (the first entity) controls a discretionary trust for a relevant income year if, for any of the 4 income years (a previous income year) before that year: (a) if the previous income year is before the 2007‑08 income year—the trustee of the trust made a distribution of $100,000 or more to the first entity, any of its affiliates, or the first entity and any of its affiliates; or (i) the trustee of the trust paid to, or applied for the benefit of, the first entity, any of the first entity’s affiliates, or the first entity and any of its affiliates, any of the income or capital of the trust; and (ii) the percentage (the control percentage) of the income or capital paid or applied is at least 40% of the total amount of income or capital paid or applied by the trustee for that year. (1) This section sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (2) This section also sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (3) Any ordinary income that, apart from paragraph 328‑105(1)(a) of the Income Tax Assessment Act 1997 (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have derived before the changeover year (while you were using the STS accounting method) and you have not included in your assessable income because you have not received it is included in your assessable income for the changeover year. (4) Any general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, that, apart from paragraph 328‑105(1)(b) of that Act (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have incurred before the changeover year (while you were using the STS accounting method) and that you have not deducted because you have not paid them can be deducted for the changeover year. (b) for any later income year for which you are a small business entity but only if you used the STS accounting method for the income year before that later year. > Note: Example: You are a small business entity for the 2007‑08 and 2008‑09 income years and you continue to use the STS accounting method for those years. You are not a small business entity for the 2009‑10 income year so you cannot continue to use the STS accounting method for that year. Because you cannot use the STS accounting method for the 2009‑10 income year, you will not be able to use it again for a later income year even if you are a small business entity for that later year. In sections 328‑115 and 328‑120, STS accounting method means the accounting method that was required by the Income Tax Assessment Act 1997 to be used by STS taxpayers for the 2004‑05 income year. (b) you made a choice under subsection 328‑175(3) of old Subdivision 328‑D in relation to a depreciating asset you use to carry on a primary production business and for which you could deduct amounts under Subdivision 40‑F or 40‑G of the Income Tax Assessment Act 1997. (2) In determining whether you can choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997 in an increased access year, disregard subsection 328‑175(10) of that Act. (3) In applying paragraph 328‑175(10)(b) of that Act for the purpose of determining whether you can choose to use that Subdivision in any income year after the increased access years, disregard: (4) Paragraph 328‑180(1)(b) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that paragraph to $1,000: (i) first used the asset, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (i) first used the asset, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (i) first used the asset, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, on or after 1 July 2023 and on or before 30 June 2026. (a) a reference in that paragraph to the end of the income year in which you start to use the asset, or have it installed ready for use, for a taxable purpose were a reference to the earlier of: if: (i) first used the asset, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021. (5) Paragraph 328‑180(2)(a) or (3)(a) of the Income Tax Assessment Act 1997 applies to an amount included in the second element of the cost of an asset as if a reference in that paragraph to $1,000: (5A) For the purposes of determining whether, under subsection 328‑180(2) of the Income Tax Assessment Act 1997, you can deduct, for an income year (the current year), the taxable purpose proportion of an amount included in the second element of the cost of an asset, disregard paragraph (b) of that subsection if: (2) For the purposes of determining whether subsection 328‑180(1) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (b) of that subsection (which sets a limit of $1,000 on the cost of the asset) if, in the period beginning at the 2020 budget time and ending on 30 June 2023, you: (3) For the purposes of determining whether subsection 328‑180(2) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (a) of that subsection (which sets a limit of $1,000 on the amount) if the amount is included in the second element of the cost of the asset at any time in the period beginning at the 2020 budget time and ending on 30 June 2023. (4) In applying paragraph 328‑180(3)(a) of the Income Tax Assessment Act 1997 to an asset, disregard an amount included in the second element of the cost of the asset if the amount is deducted under subsection 328‑180(2) of that Act, as modified by subsection (3) of this section. (5) Section 328‑210 of the Income Tax Assessment Act 1997 applies as if the words “less than $1,000 but” in subsection (1) were disregarded, in relation to a deduction for an income year that ends: Subsection 328‑190(2) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that subsection to 15% were a reference to 57.5% if you are covered by section 40‑125 for the asset (which is about backing business investment). (1) A depreciating asset of yours that had been allocated to your general STS pool is treated as being allocated to your general small business pool. (2) A depreciating asset of yours that had been allocated to your long life STS pool is treated as being allocated to your long life small business pool. (3) If you made a choice, under subsection 328‑185(5) of old Subdivision 328‑D, not to have a depreciating asset allocated to your long life STS pool, the choice has effect for the purposes of subsection 328‑185(5) of new Subdivision 328‑D. (1) This section applies if a depreciating asset of yours is treated as being allocated to your general small business pool or long life small business pool under section 328‑185. (2) The opening pool balance of your general small business pool or long life small business pool for the 2007‑08 income year is taken to be the closing pool balance of your general STS pool or long life STS pool, as the case requires, for the 2006‑07 income year, reduced or increased by any adjustment required under section 328‑225 of new Subdivision 328‑D (about change in the business use of an asset). (a) you were not an STS taxpayer for the 2006‑07 income year (because you stopped being an STS taxpayer before that time); but (b) you are a small business entity for the 2007‑08 income year or a later income year and you choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets for that income year; the opening pool balance of your general small business pool or long life small business pool includes the sum of the taxable purpose proportions of the adjustable values of depreciating assets allocated to the pool under subsection 328‑185(3) of new Subdivision 328‑D for that year. (1) This section applies for the purposes of applying Subdivision 328‑D of the Income Tax Assessment Act 1997 for the 2012‑13 income year and later income years. (2) A depreciating asset that had been allocated to your long life small business pool is treated as being allocated to your general small business pool. (a) the closing pool balance of your general small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under section 328‑225 of that Act; and (b) the closing pool balance of your long life small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under that section. (1) This section applies if you chose to stop being an STS taxpayer for the 2005‑06 income year or the 2006‑07 income year. (2) You cannot choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets until at least 5 years after the income year for which you chose to stop being an STS taxpayer. > Note: Subdivision 328‑D of the Income Tax Assessment Act 1997 continues to apply to depreciating assets that have been allocated to your small business pools even if you are not a small business entity, or do not choose to use that Subdivision, for an income year: see section 328‑220 of that Subdivision. (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct 20% of particular expenditure for your 2023‑24 income year if: (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (d) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑450 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (6) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (ii) if the provider is a registered body of a kind listed in paragraph (2)(b), (c) or (d)—the training is within the provider’s scope of registration for that kind of registered body; and (d) each enrolment, or arrangement, for the provision of the training is made or entered into at or after 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022; and > Note: Paragraphs (b) and (c) mean this section will not apply to expenditure for on‑the‑job training or training provided by you in house. (a) a registered higher education provider (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); (b) a NVR registered training organisation (within the meaning of the National Vocational Education and Training Regulator Act 2011); (c) a registered education and training organisation (within the meaning of the Education and Training Reform Act 2006 (Vic.)); (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct for your 2023‑24 income year an amount that is equal to the sum of: (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (3) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑460 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (4) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (b) you incur the expenditure in the period starting at 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022 and ending at the end of: (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (4) For the purposes of paragraphs (1)(c) and (2)(c), in working out whether you can deduct an amount of expenditure on a depreciating asset, assume that: (b) throughout that effective life, you will use the asset for a taxable purpose to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose. (a) 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑470(1) or (3) applies in relation to the income year; and > Note: The deduction relates to the period of 1 July 2023 to 30 June 2024. An entity may have deducted an amount under paragraph (a) for a previous income year if the entity has a substituted accounting period. (2) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑470 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (3) Sections 8‑10, 40‑215 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (c) you start to use the asset, or have it installed ready for use, for any purpose after 30 June 2023 but before 1 July 2024; and (d) you start to use the asset, or have it installed ready for use, for a taxable purpose at a time (the start time) that is: (e) you are a small business entity, or an entity covered by subsection (4), for the income year that includes the start time; and (h) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) a new reasonably comparable depreciating asset that uses a fossil fuel (other than a use of which that is merely incidental) is available in the market at the start time; (ii) if the asset is being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than the other asset; (iii) if the asset is not being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than a new reasonably comparable depreciating asset that is available in the market at the start time; or (i) a depreciating asset (other than an asset excluded under subsection (6)) that uses electricity, or energy that is generated from a renewable source, to be more energy efficient; (iv) the use of electricity, or energy that is generated from a renewable source, by another depreciating asset to be monitored. (a) the amount is included in the second element of a depreciating asset’s cost under paragraph 40‑190(2)(a) of the Income Tax Assessment Act 1997; and (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (d) you are a small business entity, or an entity covered by subsection (4), for the income year in which the expenditure is incurred; and (i) if the asset could use a fossil fuel (other than a use of which that is merely incidental)—the asset to only use electricity, or energy that is generated from a renewable source; (ii) if the asset uses electricity, or energy that is generated from a renewable source—the asset to be more energy efficient; (g) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) For the purposes of paragraph (1)(b) or (3)(b), in working out whether you can deduct an amount of expenditure assume that: (i) for the purposes of paragraph (1)(b)—to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose; or (ii) for the purposes of paragraph (3)(b)—to the same extent as you use it for a taxable purpose in the income year in which the expenditure is incurred. (b) expenditure (other than expenditure referred to in subparagraph (3)(e)(i)) on an asset that can use a fossil fuel (other than a use of which that is merely incidental); (c) an asset that solely or predominantly generates electricity from a renewable source (for example, photovoltaic cells) or expenditure on such an asset; (d) an asset, or expenditure, being capital works for which you can deduct an amount under Division 43 of the Income Tax Assessment Act 1997; > Note: Subsections (1) and (3) also do not apply to an item of trading stock because such an asset is not a depreciating asset: see section 40‑30 of the Income Tax Assessment Act 1997. A reference in each of the following provisions of the Income Tax Assessment Act 1997 to a registration under section 27A of the Industry Research and Development Act 1986 includes a reference to a registration under former section 39J of that Act: (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) the R&D entity cannot deduct an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from: (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D entity could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:22pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the R&D entity is taken to be able to deduct under subsection 355‑315(2) of the new Act that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the R&D entity’s assessable income for the event year under subsection 355‑315(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 for the asset, the R&D entity is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑446 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the R&D entity is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑465 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: Section 355‑315 of the new Act would otherwise apply for the event in a case where the R&D entity had new law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by an R&D partnership; and (i) the partner can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the partner chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D partnership could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the partner is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:21.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D entity</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D partnership</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the partner is taken to be able to deduct under subsection 355‑525(2) of the new Act the partner’s proportion of that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the partner’s assessable income for the event year under subsection 355‑525(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partner’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if one or more partners (including the partner) in the R&D partnership is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset, the partner is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑448 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the partner is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑467 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s deductions under section 355‑520 of the new Act mentioned in subsection (4A) of this section. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the partner for the event, do so apply to the partner for the event. > Note 1: Section 355‑525 of the new Act would otherwise apply for the event in a case where the partner had new law deductions. Item 7 of the table in subsection 57‑110(2) in Schedule 2D to the Income Tax Assessment Act 1936 applies as if the deduction rules set out in the final column of that item also included former sections 73BA and 73BH of the Income Tax Assessment Act 1936. For the purposes of step 1 of the method statement in subsection 355‑415(2) of the Income Tax Assessment Act 1997, also disregard amounts that have already been taken into account under former subsection 73B(14AA) of the Income Tax Assessment Act 1936 for the R&D entity, the grouped entity and the R&D activities for an earlier income year. (1) This section applies if, apart from former paragraph 73B(10)(a) of the Income Tax Assessment Act 1936, an eligible company could deduct advance R and D expenditure in one or more income years commencing on or after 1 July 2011. > Note: That deduction would be under former section 73B of that Act as that former section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (a) apart from Subdivision H (prepaid expenditure) of Division 3 of Part III of the Income Tax Assessment Act 1936, an eligible company can deduct an amount under former section 73B, 73BA, 73BH, 73QA, 73QB or 73Y of that Act for an income year commencing before 1 July 2011; and (c) apart from former paragraph 73B(10)(a) of that Act, the eligible company could deduct an amount, as a result of that application of that Subdivision, for an income year commencing on or after 1 July 2011. > Note: That deduction would be under that Act as it applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (3) Former paragraph 73B(10)(a) of that Act is taken to apply to those income years commencing on or after 1 July 2011 as if the reference in that former paragraph to section 39J of the Industry Research and Development Act 1986 were a reference to section 27A of that Act. (4) An expression used in this section that is also used in former section 73B of the Income Tax Assessment Act 1936 has the same meaning in this section as it has in that former section. This Subdivision applies to core technology (within the meaning of former section 73B of the Income Tax Assessment Act 1936) if: (a) you incurred core technology expenditure (within the meaning of that former section) in an income year commencing before 1 July 2011 in relation to the core technology under one or more contracts entered into at or after the time referred to in former subsection 73B(12) of that Act; and (b) that expenditure (the undeducted expenditure) cannot be deducted for the last income year commencing before 1 July 2011. (1) This section applies for the purposes of Division 40 of the Income Tax Assessment Act 1997, other than sections 40‑292 and 40‑293 of that Act, if the core technology (the asset) is a depreciating asset. (2) Disregard this section, including its effect on the amount you can deduct under section 40‑25 of that Act for the asset, for the purposes of working out: (3) The asset’s opening adjustable value for the first income year that commences on or after 1 July 2011 (the first new income year) is equal to the amount of the undeducted expenditure. (4) Subsection 40‑75(2) of the Income Tax Assessment Act 1997 applies to the asset as if the first new income year were a change year (within the meaning of that subsection). If the core technology is not a depreciating asset, you can deduct the undeducted expenditure in equal proportions over a period of 5 income years starting in the first income year commencing on or after 1 July 2011. To work out the film component (if any) of your tax loss for the 1997‑98 income year or a later income year, apply former section 375‑805 of the Income Tax Assessment Act 1997. If you incurred a film loss for the purposes of former section 79F (Film losses of 1989‑90 to 1996‑97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989‑90 to 1996‑97 income years, that film loss is the film component of your tax loss for that income year. (1) To work out your film loss (if any) for the purposes of the Income Tax Assessment Act 1997 for the 1989‑90 or a later income year, apply former section 375‑810 of that Act. (2) You can deduct in the 1997‑98 or a later income year your film loss for any of the 1989‑90 to 1996‑97 income years only to the extent that it has not already been deducted. (1) Division 392 of the Income Tax Assessment Act 1997 applies to assessments for the 1998‑99 income year and later income years. (a) it had applied to your assessment for each income year before the 1998‑99 income year for which Division 16 of Part III of the Income Tax Assessment Act 1936 applied in relation to your income; and (b) you had carried on a primary production business during each income year before the 1998‑99 income year when you carried on a business of primary production; and (c) for each income year before the 1998‑99 income year you had a basic taxable income equal to your taxable income for the income year for the purposes of Division 16 of Part III of the Income Tax Assessment Act 1936. > Note: Section 149A of the Income Tax Assessment Act 1936 identifies what your taxable income for an income year is for the purposes of Division 16 of Part III of that Act. Division 392 of the Income Tax Assessment Act 1997 does not apply to your assessment for the 1998‑99 income year or a later income year if you made an election under section 158A (Election that Division not apply) of the Income Tax Assessment Act 1936 relating to an income year before the 1998‑99 income year. 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 A reference in Division 393 of the Income Tax Assessment Act 1997 to a deduction under section 393‑5 of that Act for making a farm management deposit is taken to include a reference to a deduction under section 393‑10 in Schedule 2G to the Income Tax Assessment Act 1936, as in force just before the commencement of this section, if the deposit was made before the 2010‑11 income year. #### 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 (b) the deposit was made with an FMD provider as a result of a request to which section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, applied; the unrecouped FMD deduction in respect of the deposit at that time is equal to the amount of the unrecouped deduction (within the meaning of the former subsection 159GA(3) of the Income Tax Assessment Act 1936) in respect of the deposit immediately before it ceased to be a deposit under the Loan (Income Equalization Deposits) Act 1976. > Note: This means that the unrecouped deduction relating to the deposit under the Loan (Income Equalization Deposits) Act 1976 continues to apply (by becoming an unrecouped FMD deduction) when the deposit is transferred to an FMD provider as a farm management deposit. The Loan (Income Equalization Deposits) Act 1976 was repealed on 22 February 2005. If a beneficiary of a trust was covered by paragraph (c) of the definition of primary producer in section 393‑25 in Schedule 2G to the Income Tax Assessment Act 1936 in the 2009‑10 income year, treat subsection 393‑25(3) of the Income Tax Assessment Act 1997 as having applied to the beneficiary for the purpose of determining the maximum number of choices that the trustee may make under subsection 393‑27(2) of that Act for the 2010‑11 income year. (a) a farm management deposit of an owner was unclaimed moneys for the purposes of section 69 of the Banking Act 1959; and (2) For the purpose of subsection 393‑10(1) of the Income Tax Assessment Act, treat the repaid unclaimed moneys as a repayment of the deposit of the owner. (3) To avoid doubt, the payment of unclaimed moneys to the Commonwealth under section 69 of the Banking Act 1959 is not a repayment of the deposit of the owner for the purposes of Division 393 of the Income Tax Assessment Act 1997. 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 #### 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 If a farm management deposit was made with an FMD provider as a result of a request under section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, then: (a) subsections 393‑40(1) to (4) of the Income Tax Assessment Act 1997 apply as if the day the deposit was made was the day on which the deposit was originally made under the Loan (Income Equalization Deposits) Act 1976; and (1) A copyright collecting society to which section 51‑43 of the Income Tax Assessment Act 1997 applies, may elect that, from 1 July 2004, the section apply to all ordinary income, and statutory income, collected or derived by the society on or after 1 July 2004. Division 420 of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division. Subdivision 615‑C of the Income Tax Assessment Act 1997 applies to you with the modifications set out in this Subdivision if you chose to obtain a roll‑over involving \*shares or units that: (b) were your trading stock, or revenue assets, at the time immediately before that disposal, redemption or cancellation. (1) Disregard subparagraph 615‑45(a)(ii), and paragraph 615‑45(b), of the Income Tax Assessment Act 1997 if the roll‑over relates to \*shares that were disposed of, redeemed or cancelled. (2) For each of the \*shares in the interposed company that you acquired in return for those of your shares or units in the original entity that were your \*trading stock at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  (2) For the purpose of calculating any profit or loss on a future disposal, cessation of ownership, or other realisation of a \*share in the interposed company that you acquired in return for those of your shares or units in the original entity that were \*revenue assets at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  Subdivision 620‑A of the Income Tax Assessment Act 1997 applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. (1) Part 3‑90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Act (No. 1) 2002 and amended by: (2) Section 713‑50 of the Income Tax Assessment Act 1997 (about factors to consider in determining destination of distribution by non‑fixed trust) applies for the purposes of this Part in the same way as it applies for the purposes of Part 3‑90 of that Act. ### Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly‑owned subsidiary of the entity (the future head company) that became the head company of the group; or (ii) at some time during that period, the entity was a wholly‑owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (ii) it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (1) If a group is a transitional group, its head company may, subject to subsection (3), choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (3) If the choice is to be made after the end of the period mentioned in paragraph (2)(a) and before the end of the day mentioned in paragraph (2)(b), it cannot be made unless each entity in relation to which the conditions in subsection (5) are satisfied has agreed to it being made. (a) the entity (the leaving entity) ceased to be a subsidiary member of the group before the choice was made (in a subsection (3) case) or before the revocation took place (in a subsection (4) case); and (b) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; and (c) the asset had become that of the head company because that section applied when a chosen transitional entity (whether or not the same entity as the leaving entity) became a subsidiary member. Section 716‑855 applies for the purposes of this Division in the same way as that section applies for the purposes of Part 3‑90 of the Income Tax Assessment Act 1997. is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705‑B of that Act and with this Division. 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity Section 701‑10 (cost to head company of assets of joining entity) and subsection 701‑35(4) (setting value of trading stock at tax‑neutral amount) of the Income Tax Assessment Act 1997 do not apply to the assets of a chosen transitional entity. > Note: The fact that the head company inherits the entity’s history under section 701‑5 of that Act when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time. #### 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities (2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non‑chosen subsidiary) is worked out in a special way. (b) for each sub‑group (see subsection (6)) that exists in relation to the non‑chosen subsidiary—the sub‑group’s notional allocable cost amount (see subsection(5)) for the non‑chosen subsidiary. (4) The head company adjusted allocable amount for the non‑chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if; (b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of head company’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub‑group in relation to the non‑chosen subsidiary. (5) For each sub‑group that exists in relation to the non‑chosen subsidiary, there is a sub‑group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non‑chosen subsidiary if: (a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non‑chosen subsidiary and the entities comprising the sub‑group; and (c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub‑group membership interests (see subsection (6)) in relation to the sub‑group, and any such entity held those membership interests during the period when it actually held them; and (d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of chosen transitional entity’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub‑group. (6) If a chosen transitional entity holds membership interests in a non‑chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non‑chosen subsidiary: (a) the chosen transitional entity and each interposed non‑chosen subsidiary comprise a sub‑group in relation to the non‑chosen subsidiary (unless the non‑chosen subsidiary is included in a sub‑group in relation to another non‑chosen subsidiary); and (i) the membership interests that the chosen transitional entity holds directly in the non‑chosen subsidiary or in any of the interposed non‑chosen subsidiaries; (ii) the membership interests that each interposed non‑chosen subsidiary holds directly in the non‑chosen subsidiary or in any of the other interposed non‑chosen subsidiaries. #### 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities If any provision of the Income Tax Assessment Act 1997 would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply. > Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred. (1) This section has effect for the purposes of applying section 705‑70 (step 2 of allocable cost amount) of the Income Tax Assessment Act 1997 in relation to a transitional entity. (2) In spite of subsection 705‑70(1A) of that Act, if the amount of an accounting liability of the transitional entity would be different when it becomes an accounting liability of the transitional group, that difference is not taken into account in working out the amount of the liability. #### 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different (a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset (the roll‑over asset) for which there was: (ii) roll‑over relief under section 40‑340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and (i) became an asset of the head company when the transitional group came into existence because subsection 701‑1(1) (the single entity rule) of that Act applies; or differs at that time from what it would have been if the act, transaction or event that gave rise to the CGT event had not occurred in relation to the roll‑over asset; then the provisions mentioned in subsection (2) apply as if the act, transaction or event had not occurred in relation to the roll‑over asset. (a) the act, transaction or event mentioned in subsection (1) happened before a demerger and in connection with the demerger; and (b) before the transitional group came into existence, at least one of the following entities ceased to be a member of the demerger group because of the demerger: (i) the originating company in relation to the roll‑over, or the transferor in relation to the roll‑over relief, was a foreign resident; and (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as a transitional foreign‑held subsidiary of the group. #### 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets (1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied. (2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset. (a) the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and (b) former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset. (4) The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group. (6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses. #### 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets (b) just before the transitional group came into existence, the entity that became the head company held a pre‑CGT asset; and (d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre‑CGT asset and is held by the head company only because the entity is taken by subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company. (2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence. #### 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity (1) This section provides for an addition to the step 1 amount for working out under section 711‑20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity) that ceases to be a subsidiary member of the transitional group at a time (the leaving time), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701‑1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount for paragraph</span><span> </span><span>(2)(c)</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">If, because of the circumstances described in paragraphs</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(a) and (b):</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">The amount is:</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:180.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following provisions applied to the entity:</span></p><p class="Tablea"><span>(a) former section</span><span> </span><span>61A of the </span><span style="font-style:italic">Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(b) former Subdivision</span><span> </span><span>57</span><span>‑</span><span>I in Schedule</span><span> </span><span>2D to the</span><span style="font-style:italic"> Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(c) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(4) of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td><td style="width:148.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the amount treated as being the cost of the asset under that provision; and</span></p><p class="Tablea"><span>(b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>2</span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following subsections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span><span> applied to the entity:</span></p><p class="Tablea"><span>(a) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(5);</span></p><p class="Tablea"><span>(b) 58</span><span>‑</span><span>70(3)</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The amount treated as being the cost, or the first element of the cost, of the asset under that subsection</span></p></td></tr></tbody></table> ``` (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997, as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="4" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amounts and provisions for different dates of acquisition</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Date of the acquisition</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Amount</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Provision of Division</span><span style="font-weight:bold"> </span><span style="font-weight:bold">58 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> applying to the acquisition and the working out of the amount</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:76.7pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>160</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>220</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>After 30</span><span> </span><span>June 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>First element of the cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subsection</span><span> </span><span>58</span><span>‑</span><span>70(5)</span></p></td></tr></tbody></table> ``` > Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. > Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and ### Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: #### 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70‑45 to 70‑70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420‑51 to 420‑58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (a) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority‑owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority‑owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority‑owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority‑owned entity became a subsidiary member of the group, there was roll‑over relief under section 40‑340 of the Income Tax Assessment Act 1997. (a) while the asset is, because subsection 701‑1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, its tax cost setting amount is taken to be equal to the continuing majority‑owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711‑30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997. (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset becomes that of an entity (a new asset holder) other than the head company because subsection 701‑1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder) acquiring some or all of the membership interests in the new asset holder; and (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset is acquired by another entity (a new asset holder) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll‑over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value asset just before the acquisition; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 #### 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 (b) members of the consolidated group or the MEC group mentioned in subsection 104‑500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701‑1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701‑1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (3) If this section applies, neither subsection 104‑500(4) nor subsection 104‑500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year. ### Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C‑B); and (b) modifies certain rules in Part 3‑90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C‑C). > Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719‑2 and 719‑10 of this Act). 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership #### 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(ii) of that Act (see subsection 719‑2(3) of this Act). (b) a trust (a non‑resident trust) that does not meet the requirements in any item of the table in section 703‑25 of the Income Tax Assessment Act 1997. (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non‑resident company or a non‑resident trust; or Test entity must be a subsidiary member on assumption that non‑resident companies and non‑resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non‑resident company or non‑resident trust were a subsidiary member of the group. (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv). #### 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(iii) of that Act (see subsection 719‑2(3) of this Act). (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C‑10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3). If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C‑10 are met; and (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (ii) an entity that is a transitional foreign‑held indirect subsidiary of the group because of another application of this paragraph; Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign‑held indirect subsidiary would need to have satisfied the set of requirements in either section 701C‑10 or 701C‑15 (1) This Subdivision applies if an entity (the transitional foreign‑held joining entity) that is a transitional foreign‑held subsidiary or a transitional foreign‑held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time) the group comes into existence. (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign‑held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign‑held indirect subsidiary that becomes a subsidiary member at that time takes account of this. (a) section 701‑10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); apply, for the purposes of setting the tax cost of an asset of the transitional foreign‑held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign‑held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. > Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign‑held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign‑held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign‑held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign‑held subsidiary and the other entity. > Note 2: If the transitional foreign‑held joining entity is a transitional foreign‑held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705‑A of the Income Tax Assessment Act 1997, in its application in accordance with Subdivision 705‑B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company. Subsection 701‑35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax‑neutral amount) does not apply to the assets of the transitional foreign‑held joining entity if it is a transitional foreign‑held subsidiary. Section 701‑15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: (a) this section applies to each membership interest in the transitional foreign‑held subsidiary that is held by an entity (an eligible non‑resident) of a kind mentioned in subparagraph 701C‑20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign‑held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701‑1(2) of the Income Tax Assessment Act 1997 applies to the eligible non‑resident in the same way as it applies to the head company. Section 711‑5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: > Note: If the leaving entity is a transitional foreign‑held subsidiary (within the meaning of section 701C‑20 of the Income Tax (Transitional Provisions) Act 1997), this Division will, in accordance with subsection 701‑15(4) of this Act (see section 701C‑40 of the first‑mentioned Act), apply to membership interests that an eligible non‑resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity. (1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707‑C of the Income Tax Assessment Act 1997. (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period. (1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if: (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (d) the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997. (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: (1) The head company of a consolidated group may make a choice in the approved form to apply section 701D‑10 to another entity. (2) However, the head company cannot make that choice if subsection 701D‑10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (a) an asset of the head company because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701‑55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40‑77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40‑77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40‑285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount. (b) after the asset became an asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). > Note: The final entity will be different from the head company if an entity (the leaving entity) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40‑285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. > Note: The final entity will be entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701‑5 (the entry history rule) of that Act and perhaps also section 701‑40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity) became a subsidiary member of the group; and It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). > Note: In some cases, section 705‑47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40‑285(3) of this Act. If: (b) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and subsection 40‑285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701‑10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997. > Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997. (1) For the purposes of Part 3‑90 of the Income Tax Assessment Act 1997, this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960‑G of that Act whether the interest or right is a membership interest of the entity in the other entity. > Note: Under Subdivision 960‑G of the Income Tax Assessment Act 1997, a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001) apply to transactions in relation to the interest or right at the relevant time. Despite the amendments of section 703‑35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) If an entity (the joining entity) to which section 40‑75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time), this Subdivision applies in relation to: (ii) became assets of the head company of the group at the joining time because of section 701‑1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure. (1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). (2) If the joining entity could not deduct an amount under Subdivision 40‑B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701‑55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40‑35, 40‑37, 40‑40 or 40‑43 treated the joining entity as holding a notional asset. > Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705‑30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. (a) deductions under former Subdivision 330‑A, 330‑C or 330‑H of the Income Tax Assessment Act 1997, or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated an entity as holding because of the expenditure. (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); > Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40‑75(4) of this Act, but may have been reset since under Subdivision 40‑B of the Income Tax Assessment Act 1997. > Note 2: The effective life of a notional asset is specified by whichever one of sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act is relevant to the notional asset. (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (9) Section 705‑55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705‑45 of that Act. > Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705‑40 of the Income Tax Assessment Act 1997. (a) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701‑5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. > Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705‑305(3). (ii) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707‑A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member. 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value #### 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707‑320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor) other than the real loss‑maker mentioned in subsection 707‑315(1) of that Act for the bundle; and (b) both the real loss‑maker and the value donor became members of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (ca) neither the real loss‑maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (ii) a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (ii) section 713‑540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (2) It must have been possible for the real loss‑maker to have transferred the loss to the value donor under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss‑maker at the initial transfer time the amount worked out using the formula:  > Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707‑327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss‑maker to the transferee. > total of real loss‑maker’s non‑foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss‑makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) included in a bundle of losses: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. #### 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value (1) This section affects the calculation of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707‑325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936, in the bundle). > Note: This section does not affect the calculation of the real loss‑maker’s modified market value for other purposes (such as the real loss‑maker being a value donor for the purposes of another application of section 707‑325 of this Act). (3) One condition is that the event was an injection of capital directly into the real loss‑maker by the value donor mentioned in section 707‑325 of this Act. (c) that would have caused subsection 707‑325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss‑maker’s modified market value (even if no other events described in subsection 707‑325(4) of that Act had occurred), apart from this section. (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss‑maker (whether or not the event also involved either the value donor or the real loss‑maker); or (1) This section has effect for the purposes of working out under Subdivision 707‑C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707‑325, as if there were added to the modified market value of the real loss‑maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (c) the loss is not a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707‑A of that Act at the initial transfer time had the company: > Note: This section has effect even if the amount added to the real loss‑maker’s modified market value under section 707‑325 is nil because the value donor’s modified market value is nil. (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707‑325, as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (4) If the transferee mentioned in subsection 707‑325(1) chooses, sections 707‑310, 707‑335 (except paragraph 707‑335(2)(a)) and 707‑340 of the Income Tax Assessment Act 1997 (and subsections 707‑315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: > Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707‑325(1)(d) and (e) and subsection 707‑325(2) in an application of section 707‑325 separate from the application of that section mentioned in paragraph (1)(a) of this section. > Note: This means that a loss that provided a basis for section 707‑325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. (b) in connection with the requirement that it must have been possible for a company (the notional transferor) to transfer to another company (the notional transferee) for an income year a loss under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997. (b) ends immediately after the initial transfer time mentioned in subsection 707‑320(1) of the Income Tax Assessment Act 1997. > Note: For the purposes of identifying the trial year using the definition in section 707‑120 of the Income Tax Assessment Act 1997, the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time. (1) Subsection (3) of this section affects the calculation, under section 707‑325 of the Income Tax Assessment Act 1997 and section 707‑325 of this Act, of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (the formation time) the group became a consolidated group; and (b) the provisions described in subsection 707‑327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707‑327(1)(b) and (c) of this Act as if the bundle included the loss; and (d) subsection 707‑325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707‑325(1) of this Act chooses that this section apply in relation to the real loss‑maker. (2) Section 707‑325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. (3) Disregard for the purposes of subsection 707‑325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707‑325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or > Note: Disregarding such an event could have a direct or indirect effect on the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss‑maker’s modified market value calculated under section 707‑325 of the Income Tax Assessment Act 1997, if the real loss‑maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707‑325 of this Act to add an amount to the real loss‑maker’s modified market value for those purposes. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) that: (b) was transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from an entity other than the real loss‑maker. (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997. Disregard an event that is described in subsection 707‑325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707‑325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004. (1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss‑maker) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time) the transferee became the head company of a consolidated group; and (ii) the conditions in one or more of paragraphs 165‑15(1)(a), (b) and (c) did not exist in relation to the real loss‑maker; and (da) the real loss‑maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non‑transferred losses) of the same sort that the transferee made without a transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non‑transferred losses). (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. <table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Limit on utilising the losses</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For this income year:</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the losses that the transferee may utilise cannot exceed:</span></p></td></tr></thead><tbody><tr><td style="width:20.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:120.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The first income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span style="font-size:8pt; vertical-align:2pt">1</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The second income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) </span><span style="font-size:8pt; vertical-align:2pt">2</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the amount of the losses utilised for the income year mentioned in item</span><span> </span><span>1</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The third income year ending after the initial transfer time, or a later income year</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time</span></p></td></tr></tbody></table> ``` (4) Subdivision 707‑C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707‑A of that Act. > Note: This has 2 effects. First, Subdivision 707‑C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707‑A of that Act). (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). (7) This section does not limit the transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company. In working out when a choice may be made under subsection 707‑325(5), 707‑327(5), 707‑328A(4) or 707‑350(5), ignore losses to which section 713‑535 of the Income Tax Assessment Act 1997 applies. > Note: That section deals with losses transferred under Subdivision 707‑A of that Act from certain wholly‑owned subsidiaries of life insurance companies that are members of a consolidated group. Section 707‑405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act. (1) This section reduces the adjustable value of a notional asset that section 40‑35, 40‑37, 40‑38, 40‑40 or 40‑43 treats the head company of a consolidated group as holding, if: (b) that section treats the leaving entity as holding a notional asset because of section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997. > Note: Section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time. The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences. (1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event) happening involving an entity (the originating entity) and another entity (the recipient entity) if: (a) the event occurs in connection with a life insurance company (the member life insurance company) becoming a member of a consolidated group; and (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest) in a company or in another trust. (a) a life insurance company transfers an asset (also the original asset) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320‑200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset) to its segregated exempt assets where, apart from this Subdivision, section 320‑255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event) is made in connection with the life insurance company (also the member life insurance company) becoming a member of a consolidated group. (1) This Subdivision applies only if the originating entity (for a section 713‑505 case) or the life insurance company (for a section 713‑510 case) chooses that it apply. (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713‑510 of the Income Tax Assessment Act 1997; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713‑510 of the Income Tax Assessment Act 1997; and (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs. This Act, and the Income Tax Assessment Act 1997, apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group. (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain) that the originating entity would have made as a result of the deferral event is disregarded; and (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount) under paragraph 320‑15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (1) This section operates if, after the deferral event happens, another event (the new event) happens where the new event is: (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (i) the original asset being transferred to or from the company’s virtual PST under section 320‑180, 320‑185 or 320‑195 of the Income Tax Assessment Act 1997; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320‑235, 320‑240 or 320‑250 of that Act; or (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. > Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713‑505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (1) For a section 713‑505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713‑535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: (a) an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group at a time (the leaving time); and (b) but for the cessation of membership and section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision. Sections 716‑340 and 716‑345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. <table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:345.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Extended operation of sections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 1</span><br><span style="font-weight:bold">Sections</span><span style="font-weight:bold"> </span><span style="font-weight:bold">716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">340 and 716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">345 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> operate in relation to:</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 2</span><br><span style="font-weight:bold">In the same way as they operate in relation to:</span></p></td></tr></thead><tbody><tr><td style="width:5.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:161.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>46</span><span>‑</span><span>90 of that Act</span></p></td><td style="width:156.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>40</span><span>‑</span><span>455 of that Act</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software pool created under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure allocated to a software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Software, expenditure on which was in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>In</span><span>‑</span><span>house software, expenditure on the development of which is allocated to a software development pool</span></p></td></tr></tbody></table> ``` (1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: Section 703‑30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004. (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time) a wholly‑owned subsidiary of the entity that became the head company of the group (the head entity), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier‑1 company of the group at the formation time. Despite the amendment of section 719‑30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) Section 719‑160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719‑160(3) of the Income Tax Assessment Act 1997. (3) However, that effect of section 719‑160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division. (2) Paragraphs 701‑1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier‑1 company at the time the MEC group came into existence. (a) the entity and one or more other entities were members of a potential MEC group as eligible tier‑1 companies, throughout the period: (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier‑1 company, at the time the transitional group came into existence. To avoid doubt, sections 707‑325 and 707‑327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719‑305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707‑A of that Act. Subsection 719‑325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006. (1) A reference in an agreement to item 25 of the table in subsection 721‑10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: (1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: Division 725 applies to a scheme entered into on or after 1 July 2002. It also applies to a scheme entered into on or after 27 June 2002, but only if: ### Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (1) Division 727, as inserted by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 and amended by the New Business Tax System (Consolidation and Other Measures) Act 2003, applies to a scheme entered into on or after 1 July 2002. (b) a presumed indirect value shift that happens under the scheme and affects a realisation event that happens on or after 1 July 2002. (a) the economic benefits taken into account in determining that the scheme has resulted in that indirect value shift or presumed indirect value shift include economic benefits provided by: > Note: In that case, the consequences of the trigger event are worked out under Division 138 or 139 of the Income Tax Assessment Act 1997: see items 13 and 14 of Schedule 15 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002. (1) An indirect value shift does not have consequences under Division 727 of the Income Tax Assessment Act 1997 if, to the extent of at least 95% of their total market value, the greater benefits consist entirely of: (a) a right to have services that are covered by section 727‑240 of that Act provided directly by the losing entity to the gaining entity; or (d) if the losing entity’s 2002‑2003 income year ends before 30 June 2003—the start of the losing entity’s 2004‑2005 income year. (2) For the purposes of section 727‑850 (about a presumed indirect value shift affecting a realisation event) of the Income Tax Assessment Act 1997, subsection (1) of this section applies to the presumed indirect value shift: #### 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (2) Paragraph 727‑470(2)(a) of the Income Tax Assessment Act 1997 (as in force immediately before the commencement of this section) continues to have effect in relation to the indirect value shift as if the repeals and amendments made by Schedule 1, Parts 1 and 2 of Schedule 3 and Schedule 8 to the Tax Laws Amendment (Small Business) Act 2007 had not been made. ## Division 102 Application of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 ## 102‑1 Application of Parts 3‑1 and 3‑3 o 102‑1 Application of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years. ## 102‑5 Working out capital gains and capi 102‑5 Working out capital gains and capital losses (1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision. > Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision). > Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936). > Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997. (a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936. ## 102‑15 Applying net capital losses 102‑15 Applying net capital losses (1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936. (2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997. > Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997. (3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year. ## 102‑20 Net capital gains, capital gains 102‑20 Net capital gains, capital gains and capital losses for income years before 1998‑99 ## 102‑25 Transitional capital gains tax pr 102‑25 Transitional capital gains tax provisions for certain Cocos (Keeling) Islands and Norfolk Island assets (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and (d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; (f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time. > Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and (d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015. (a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or (4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if: (b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset. ## Division 104 CGT events ## Subdivision 104 ‑C—End of a CGT asset ## 104‑25 Cancellation, surrender and simil 104‑25 Cancellation, surrender and similar endings The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year. ## Subdivision 104 ‑D—Bringing into existence a CGT asset ## 104‑40 Granting an option 104‑40 Granting an option (a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and ## Subdivision 104 ‑E—Trusts ## 104‑70 Capital payment before 18 Decembe 104‑70 Capital payment before 18 December 1986 for trust interest (1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied: (b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and (d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works). (3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936. ## Subdivision 104 ‑G—Shares ## 104‑135 Capital payment for shares 104‑135 Capital payment for shares Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936. ## Subdivision 104 ‑I—Australian residency ends ## 104‑165 Choices made under subsection 10 104‑165 Choices made under subsection 104‑165(2) of the Income Tax Assessment Act 1997 (b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006. (2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement. > Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement. ## 104‑166 Subsection 104‑165(1) still appl 104‑166 Subsection 104‑165(1) still applies if you continue to be a short term Australian resident Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual: (b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her. ## Subdivision 104 ‑J—CGT events relating to roll‑overs 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act ## 104‑175 Company ceasing to be member of 104‑175 Company ceasing to be member of wholly‑owned group after roll‑over (1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee). (2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year: (3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection. ## 104‑185 Change of status of replacement 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act #### 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997. ## Subdivision 104 ‑K—Other CGT events ## 104‑205 Partial realisation of intellect 104‑205 Partial realisation of intellectual property Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936. ## 104‑235 CGT event K7: asset used for old 104‑235 CGT event K7: asset used for old law R&D activities (a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936). (2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if: (a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; (a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011); (b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986. > Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section. ## Division 108 CGT assets ## Subdivision 108 ‑A—What a CGT asset is ## 108‑5 CGT assets 108‑5 CGT assets If: (a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and (b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936; ## Subdivision 108 ‑B—Collectables ## 108‑15 Sets of collectables 108‑15 Sets of collectables Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995. ## Subdivision 108 ‑D—Separate CGT assets ## 108‑75 Capital improvements to CGT asset 108‑75 Capital improvements to CGT assets for which a roll‑over may be available (1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997. (2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997. (3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997. (4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997. > Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one. ## 108‑85 Improvement threshold 108‑85 Improvement threshold Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year: ## Division 109 Acquisition of CGT assets ## Subdivision 109 ‑A—Operative rules ## 109‑5 General acquisition rules 109‑5 General acquisition rules (a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and (b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year; the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. ## Division 110 Cost base and reduced cost base ## Subdivision 110 ‑A—Cost base ## 110‑25 Cost base of CGT asset of life in 110‑25 Cost base of CGT asset of life insurance company or registered organisation For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation. ## 110‑35 Incidental costs 110‑35 Incidental costs Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset. ## Division 112 Modifications to cost base and reduced cost base ## Subdivision 112 ‑A—General rules ## 112‑20 Market value substitution rule 112‑20 Market value substitution rule (b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section); > Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply. ## Subdivision 112 ‑B—Special rules ## 112‑100 Effect of terminated gold mining 112‑100 Effect of terminated gold mining exemptions (1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if: (a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and (2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value. (4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value. (a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and ## Division 114 Indexation of cost base ## 114‑5 When indexation relevant 114‑5 When indexation relevant Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997. ## Division 118 Exemptions ## Subdivision 118 ‑A—General exemptions ## 118‑10 Interests in collectables 118‑10 Interests in collectables (2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less. ## 118‑24A Pilot plant 118‑24A Pilot plant (1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936: (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. ## Subdivision 118 ‑B—Main residence ## 118‑110 Foreign residents 118‑110 Foreign residents (1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if: (2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by: (a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or ## 118‑195 Exemption—dwelling acquired from 118‑195 Exemption—dwelling acquired from deceased estate (a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or (2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period. ## Subdivision 118 ‑C—Goodwill ## 118‑260 Business exemption threshold 118‑260 Business exemption threshold Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year: ## Division 121 Record keeping ## 121‑15 Retaining records under Division 121‑15 Retaining records under Division 121 If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997. ## 121‑25 Records for mergers between quali 121‑25 Records for mergers between qualifying superannuation funds (1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002. (2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset. (3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required. ## Part 3 ‑3—Capital gains and losses: special topics (a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and (2) Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001 (the new Act) applies to the plant on this basis: (a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant’s opening adjustable value; and (b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and (c) if you excluded an amount from your assessable income under section 42‑290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999—the cost of the plant, and its opening adjustable value, are reduced by that amount; and (d) if subparagraph (1)(b)(ii) applies to you—you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi‑owner of the plant under the former Act continue. (3) If you were using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis: (a) for the diminishing value method—replace the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate you were using; and (i) replace the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate you were using; and (ii) increase the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note 1: Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced. > Note 2: Small business entities can choose to work out the decline in value of their depreciating assets under Division 328. (a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or (3) If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40‑70(1) or 40‑75(1) of the new Act that includes the plant’s effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and (2) For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets. (3) For a case where the plant is merged into another depreciating asset, section 40‑125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it. (b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and (a) you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and (b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU’s opening adjustable value. (1) Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001. (2) For a unit of software for which you were deducting amounts under Subdivision 46‑B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis: (d) you must use the same effective life you were using under Subdivision 46‑B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001. (1) This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day. (b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and (c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and (1) This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001. > Note: Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8). (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330‑80 of the former Act for your income year ending on 30 June 2001; and (c) in applying the formula in section 40‑75 of the new Act for the income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The remaining effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these: (i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and (ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (7) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and (b) the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of expenditure incurred in carrying on eligible quarrying operations—the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (i) you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day) after 30 June 2001; or (ii) the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day) after 30 June 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which the start day occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year. there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (1) This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330‑H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and (c) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (i) any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset); (i) any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (4) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (4) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (b) the expenditure would have been transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330‑H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for your income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (1) Despite subsections 40‑35(5), 40‑38(5) and 40‑40(4), there is no additional decline in the value of the notional asset referred to in those subsections if: (a) apart from this section, subsection 40‑35(5), 40‑38(5) or 40‑40(4) would apply because the real asset referred to in that subsection is disposed of; and (a) at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373‑35 of the former Act; and (b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day. (a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and (1) Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time). (2) Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time. (a) you have deducted or can deduct an amount under Subdivision 387‑G of the former Act for an amount (the qualifying amount) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and (b) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and (1) This section applies to you if you have deducted or can deduct an amount under Subdivision 400‑A of the former Act for an amount (the qualifying amount) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400‑A of the former Act. (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and (c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400‑15(3) of the former Act; and (1) Units of plant that you had allocated to a pool under Subdivision 42‑L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act. (a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and (c) in applying the formula in section 40‑70 of the new Act for your income year in which 1 July 2001 occurs—it has a base value equal to that opening adjustable value; and (d) you replace the component in the formula in subsection 40‑70(1) of the new Act that includes an asset’s effective life with the pool percentage you were using for the pool; and (e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40‑115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and (f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset. (3) An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item). > Note 1: You work out the decline in value of an item removed under this subsection under Subdivision 40‑B of the new Act, using the cost for it worked out under section 40‑205 of the new Act. (b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset. (2) The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year) in this way: (a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and (b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section. (a) for a unit of plant (including IRUs and expenditure on software that is not pooled)—its undeducted cost at the end of 30 June 2001; or (b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence—the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or (c) for transport capital expenditure—the entity’s amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or (d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (e) for expenditure on evaluating the impact on the environment of a project—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (f) for assets that were pooled under Subdivision 42‑M or 42‑L of the former Act—the closing balance of the pool at the end of 30 June 2001. (4) The asset’s base value for applying the formula in section 40‑70 of the new Act for the diminishing value method is that opening adjustable value. (5) The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an item of plant for which you were using the prime cost method—using the rules in section 40‑10 of this Act; and (c) for a unit of software for which the entity was deducting amounts under Subdivision 46‑B of the former Act—using the rules in subsection 40‑25(2) of this Act; and (f) for an amount of expenditure on evaluating the impact on the environment of a project—using the rules in section 40‑55 of this Act. (6) The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an amount of unrecouped expenditure under Division 330 of the former Act—using the rules in section 40‑35 of this Act; and (b) for an amount of transport capital expenditure under Division 330 of the former Act—using the rules in section 40‑40 of this Act; and (7) The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act. (a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑C of the former Act; or (b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑H of the former Act; or (c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387‑B of the former Act; or (d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; or (e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365. (9) The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001. (10) You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount). (11) You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount. (1) Subsections 40‑65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened: (b) you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act. (a) paragraph 40‑65(6)(a) of the Income Tax Assessment Act 1997 included both events set out in subsection (1) of this section; and (b) subsections 40‑65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events. (1) A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936. (2) An amount you have deducted or can deduct for a water facility under Subdivision 387‑B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40‑F of the new Act. (3) A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936. (a) you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40‑115 (about splitting a depreciating asset) or 40‑125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and (b) it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40‑72 of that Act; (2) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if: (c) it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40‑72 of that Act. (3) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset) before 10 May 2006 if: (b) the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and (d) it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40‑72 of that Act. (a) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you: (b) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001. (2) If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act. (3) Otherwise, Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section. (a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or (b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or (ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life. (1) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001. > Note: If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40\. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997. (1A) Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001. (1B) Subsection (1) applies to a mining, quarrying or prospecting right (the new right) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if: (i) the other company is a member of the same wholly‑owned group as the original holder and was a member of that group just before that day; and (ii) the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer. (1D) Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if: (b) the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001. (a) you acquired, under an interest realignment arrangement, an interest (a new interest) in a mining, quarrying or prospecting right; and (b) the interest was acquired in exchange for one or more other interests (old interests) in other mining, quarrying or prospecting rights; and Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001. (a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or (b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership; the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act. (3) An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that: (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act. (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act. (6) Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243. (7) An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if: (a) you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and (8) The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section. (c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act. (2) Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001. A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act. if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011. (2) The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011. (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset for an income year is the amount worked out under section 40‑130 if: (a) the income year is the year in which you start to use the asset, or have it installed ready for use, for a taxable purpose; and (b) subsection (2) (about businesses with turnover less than $500 million) applies to you for the year and for the income year in which you started to hold the asset (if that was an earlier year); and > Note 1: An effect of paragraph (1)(a) is that this Subdivision only applies to one income year per asset. See also subsection 40‑135(1). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $500 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. Exception—assets for which the decline in value is worked out under section 40‑82 or Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (3) However, this section does not apply to a depreciating asset for an income year if you work out the decline in value of the asset for the income year under any of the following: (1) For the purposes of paragraph 40‑120(1)(c) and section 328‑182, you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you: > Note: Section 328‑182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997. (i) entering into a contract under which you hold the post‑12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑12 March 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post‑12 March 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (8) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (9) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (10) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (1) For the purposes of section 40‑120, the decline in value for the income year in which paragraph 40‑120(1)(a) is satisfied (the current year) is: > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 12 March 2020 to 30 June 2020 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2020 to 30 June 2021. (a) 50% of the asset’s cost as at the end of the current year, disregarding any amount included in the second element of the asset’s cost after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997, assuming its cost were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (3) However, the amount worked out under subsection (2) for an income year cannot be more than the amount that is the asset’s cost for the year. (a) 50% of the sum of the asset’s opening adjustable value for the current year and any amount included in the second element of its cost for that year, disregarding any amount included in that second element after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997 assuming: (ii) for the prime cost method—the component “Asset’s \*cost” in the formula in subsection 40‑75(1) of that Act (as adjusted under that section) were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (b) for the prime cost method—the sum of its opening adjustable value for the income year and any amount included in the second element of its cost for that year. (1) The decline in value of a depreciating asset is not worked out under this Subdivision for an income year if this Subdivision already applied in working out the decline in value of the asset for an income year. (2) For an income year later than the year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (3) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (4) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) You may choose that the decline in value of a particular depreciating asset for an income year, and subsequent income years, is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the first income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. If this Subdivision applies to work out the decline in value of a depreciating asset you hold for an income year, no other provision of this Act or the Income Tax Assessment Act 1997 applies to work out that decline in value. (1) For the purposes of this Subdivision, you are covered by this section for a depreciating asset if, on or before 30 June 2023: (2) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (3) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or Exception—assets for which the decline in value is worked out under Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (a) the asset is allocated to a low‑value pool, or expenditure on the asset is allocated to a software development pool (see Subdivision 40‑E of the Income Tax Assessment Act 1997); or (b) you or another taxpayer has deducted or can deduct amounts for the asset under Subdivision 40‑F of the Income Tax Assessment Act 1997 (about primary production depreciating assets). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $5 billion; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this section. (ii) if the 2019‑20 income year ends on or before 6 October 2020—the sum of your ordinary income (if any) and statutory income (if any) for the 2019‑20 income year; and (c) the sum of the amounts worked out under subsection (3) for the 2016‑17, 2017‑18 and 2018‑19 income years exceeds $100 million. (b) next, work out the cost of each of those assets (including any amounts included in the second element of the asset’s cost at a time that is in the income year); (4) For the purposes of subsection (3), disregard an asset if, at the time you first used the asset, or had it installed ready for use, for a taxable purpose: (a) it was not reasonable to conclude that you would use the asset principally in Australia for the principal purpose of carrying on a business; or (5) For the purposes of paragraph (3)(b), to work out the cost of a depreciating asset that is capital works (see section 43‑20 of the Income Tax Assessment Act 1997): (a) disregard section 40‑45 of that Act and work out the cost of the capital works using Subdivision 40‑C of that Act; and (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under subsection (3) if: (a) where section 40‑155 covers you for the current year (regardless whether section 40‑157 also covers you for the current year)—an exclusion applies to you and the asset for the current year under section 40‑165 (about exclusions for businesses with turnover of $50 million or more); or (ii) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s start time occurs in the current year—the asset’s cost as at the end of the current year, disregarding any amount included in the asset’s cost after 30 June 2023; or (b) if the asset’s start time occurred in an earlier year—the sum of its opening adjustable value for the current year and any amount included in the second element of its cost for the current year, disregarding any amount included in the asset’s cost after 30 June 2023. > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 6 October 2020 to 30 June 2021 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2021 to 30 June 2022. (a) where paragraph 40‑160(2)(a) applies—section 40‑155 would not cover you for the income year if the reference in that section to $5 billion were instead a reference to $50 million; and (i) entering into a contract under which you hold the post‑6 October 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑6 October 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of satisfying paragraph 40‑160(1)(a) for the post‑6 October 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you already satisfied paragraph 40‑160(1)(a) of this Act for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (9) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (1) For the purposes of subsections 40‑160(2) and 40‑170(1A), an exclusion applies to you and an asset for an income year if any of the exclusions in this section applies in relation to the asset. (4) This exclusion applies in relation to the asset if the asset is available for use, at any time in the income year, by any of the following: (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under this section if: (ii) you started to use the asset, or have it installed ready for use, for a taxable purpose in an earlier income year; and (b) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under section 40‑82 of the Income Tax Assessment Act 1997—the amount worked out under subsection (3); or (b) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under Subdivision 40‑BA of this Act—the amount worked out under subsection (4); or Assets affected by section 40‑82 of the Income Tax Assessment Act 1997 (about assets costing less than $150,000, medium sized businesses) (a) the amount that would be the asset’s decline in value for the year under section 40‑82 of the Income Tax Assessment Act 1997, assuming the reference in subparagraph 40‑82(3A)(b)(ii) of that Act to 31 December 2020 were instead a reference to the 2020 budget time; and (a) the amount that would be worked out under paragraph 40‑130(2)(a) or (4)(a) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(a) and (4)(a) to 30 June 2021 were instead references to the 2020 budget time; and (c) the amount that would be worked out under paragraph 40‑130(2)(b) or (4)(b) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(b) and (4)(b) to “the amount worked out under paragraph (a)” were instead references to “the amounts worked out under paragraphs 40‑170(4)(a) and (b)”. (a) the amount that would be the asset’s decline in value for the year under Division 40 of the Income Tax Assessment Act 1997, disregarding any amounts included in the eligible second element worked out under section 40‑175 of this Act for the asset for the year; and The amount worked out under this section (the eligible second element) for a depreciating asset for an income year is the sum of any amounts included in the second element of the asset’s cost at a time that is in both of the following periods: (1) For an income year later than a year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (2) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (3) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) This section applies if the decline in value for a depreciating asset for an income year is worked out under this Subdivision, and at a time (the balancing adjustment time) in a later income year: (i) it becomes not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (b) none of the requirements in paragraphs 40‑295(1)(a), (b) or (c) of the Income Tax Assessment Act 1997 are satisfied in relation to the asset. (2) For the purposes of Subdivision 40‑D of the Income Tax Assessment Act 1997 assume that, at the balancing adjustment time, you stop using the asset, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again. (3) For the purposes of section 40‑180 of the Income Tax Assessment Act 1997 assume that the reference in item 3 of the table in subsection 40‑180(2) of that Act to “because you stop using it for any purpose expecting never to use it again” were instead a reference to “because of section 40‑185 of the Income Tax (Transitional Provisions) Act 1997”. (4) If a balancing adjustment event happens to a depreciating asset you hold because of this section, this Subdivision cannot apply to work out the decline in value of the asset for a later income year. (1) You may choose that the decline in value of a particular depreciating asset for an income year is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year. (1) Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40. (a) you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset: (ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and (4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day. (5) The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if: (i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or (ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and  > sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose. (7) Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens: (a) if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b). (i) an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and (ii) the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and (3) The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount. (a) on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and (c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and (ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal; (2) There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal. (3) Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount. If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997. (a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and (b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and: (i) the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, the R&D entity is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—a clawback amount under section 355‑447 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑466 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. (b) section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions. > Note 2: The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and: (i) the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset; (ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, an R&D entity (the partner) that is a partner in the R&D partnership and is entitled to one or more new law deductions for one or more income years for the asset, is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—a clawback amount under section 355‑449 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑468 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s new law deductions mentioned in paragraph (2)(b) of this section. (4) Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event. > Note: Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions. (1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant. (b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and (3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it. (a) there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and (b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act. (2) The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor. (3) The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and <table cellspacing="0" cellpadding="0" style="width:364.2pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:353.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading" style="page-break-inside:avoid"><span>Conditions for small business taxpayers retaining accelerated rates</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Condition</span></p></td></tr></thead><tbody><tr><td style="width:21.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:321.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>The transferee must have been a small business taxpayer for the income year (the </span><span style="font-weight:bold; font-style:italic">start year</span><span>) that includes the time when the entity first used the plant, or first had it installed ready for use.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>2</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>At that time, neither of these applies:</span></p><p class="Tablea"><span>(a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;</span></p><p class="Tablea"><span>(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection</span><span> </span><span>(5).</span></p></td></tr></tbody></table> ``` (4) For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership. (5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement. (a) for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or (i) replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and (ii) increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).  (b) if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11). (c) that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and (d) that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and (e) that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity. (a) for taxable supplies (if any) the entity makes during the year in the course of carrying on a business—the value (as defined by section 9‑75 of the GST Act) of the supplies; and (b) for other supplies the entity makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies. (1) The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for: (a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (c) for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or (d) for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant. (3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115. (4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain. (5) Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee. (i) the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or (a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and (1) A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act. (2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year. For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if: Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act. (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset): and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply. (i) for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or (ii) for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and (c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act. (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and (2) Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act. The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under: (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on: (2) You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act. (3) A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under: (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and (2) Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act. A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act. The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001. If: (d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act; (a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and (a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and (b) the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and (c) paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997. Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years. (1) For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section. (b) the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (b) that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (1) There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea" style="page-break-after:avoid"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a); and</span></p><p class="Tablea" style="page-break-after:avoid"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (b) disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (f) an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division. (4) If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45‑5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest. (5) If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45‑10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest. Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Disregard the use of the following amounts in determining (for the purposes of Subdivision 50‑A of the Income Tax Assessment Act 1997 whether a fund established before 1 July 1997 operates and pursues its purposes in Australia: Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years. (2) However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date. Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if: (b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time. Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years. 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years (1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act. <table cellspacing="0" cellpadding="0" style="margin-left:56.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:258.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Application provisions for specific sections</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-size:9pt; font-weight:bold">Item</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">This section of the </span><span style="font-size:9pt; font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-size:9pt; font-weight:bold"> ...</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">Applies as described in this provision of this Act ...</span></p></td></tr></thead><tbody><tr><td style="width:24.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55(1)</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>95</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>8</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td></tr></tbody></table> ``` (a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and (b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997. > Note: Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year. (b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997; sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997). > Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock. (3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997. (a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and (b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936; > Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal. #### 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997. (1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year. (2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936. (3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year: (a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners; (b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed. > Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year. > Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year. (b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year; the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year. (2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. (3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2). #### 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997. #### 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business (1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. (2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity. > Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997. (1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. (2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value. > Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997. #### 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year. (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. > Note: Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. > Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given). (5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act). (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment. > Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%. (5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%. (6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.  > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section. (b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4). Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age. Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later. Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies. Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3. (4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997. (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%. > Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986. (5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D. > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. (a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and (b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year). (3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and (2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual: (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income. > Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F. > Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997. > Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997. #### 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 (1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012. (2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies. (3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act. (b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009. (2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if: (i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest; (iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or (i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest; (iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009. (2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time. (4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2): (a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and (b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being: (ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and (c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and (d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if: (i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or (ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and (e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and (i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and (ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and (g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest. (a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced: (i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or (ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and (b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5. (2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right. (3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right. (2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. (3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section. Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years. (1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision. > Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision). > Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936). > Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997. (a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936. (1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936. (2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997. > Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997. (3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and (d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; (f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time. > Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and (d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015. (a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or (4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if: (b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset. The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year. (a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and (1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied: (b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and (d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works). (3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936. Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936. (b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006. (2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement. > Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement. Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual: (b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her. 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act (1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee). (2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year: (3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection. #### 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997. Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936). (2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if: (a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; (a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011); (b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986. > Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section. If: (a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and (b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936; Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995. (1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997. (2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997. (3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997. (4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997. > Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one. Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year: (a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and (b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year; the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation. Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset. (b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section); > Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply. (1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if: (a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and (2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value. (4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value. (a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997. (2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less. (1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936: (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. (1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if: (2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by: (a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or (a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or (2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period. Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year: If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997. (1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002. (2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset. (3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required. (i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and (ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and (c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and (f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997). (a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or (1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:  > total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part. (a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or (2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section. (3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1). (1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences. > Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997. (c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets). (4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act. (5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act. Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement. (a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and (2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time. (a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and (ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs. (2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer. (a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and (b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest; (2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event. (3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly. (4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly. <table cellspacing="0" cellpadding="0" style="width:362.55pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:351.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Creating a CGT asset</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">CGT event number</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Applicable amount</span></p></td></tr></thead><tbody><tr><td style="width:50.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D1</span></p></td><td style="width:290.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the incidental costs the originating company incurred that relate to the CGT event</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D2</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the option</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D3</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the right</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>F1</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred on the grant, renewal or extension of the lease</span></p></td></tr></tbody></table> ``` (5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day. A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision. (a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996. (b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. (b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend. (3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities. (1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company. (2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred. (3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company. (1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of: (2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of: (3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note. (1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised. (b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and (ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act. You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and (b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996. (c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and (c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over. (3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. (a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and (c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and (d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act. (3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division. Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years. A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: (1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day. (2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice. (a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and (b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and (a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and (b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and (c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group. (5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004. (6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection. (1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss): (b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions); and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time: (i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or (e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and (f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and (ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred; (2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if: (a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these: (i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset; (ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and (3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act. (a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and (b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section. (5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of: (a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and (b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset. Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. (ii) that could have been deducted, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the deduction had not been limited by the company’s income for that income year; and (ii) that could have been applied, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the application of the loss had not been limited by the company’s capital gains for that income year. 170‑C Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred #### 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years. #### 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). #### Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997. Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997. If: (a) all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (d) that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and (e) the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place. Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years. > introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament. Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day. #### Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting #### 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B. (1) The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day. (2) No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted. #### 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting (1) Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if: (a) the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and (b) none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount. (2) No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount. (1) This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account. (2) For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. > Note 2: If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60. (3) For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)). (4) For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. (5) The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if: (a) during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and (b) the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section. (a) the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and (b) during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components. (7) For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. (8) Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it: (b) the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component. (9) Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component. (10) For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002: (b) lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination; (c) a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination); (e) the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination); (f) the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination). Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period: 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows: (a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and (i) in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and (ii) in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. > Note: A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002. #### 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002: (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:23.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:87.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A franking surplus</span></p></td><td style="width:220.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.009.png" width="175" height="58" alt="Start formula Amount of the class A franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.010.png" width="190" height="56" alt="Start formula Amount of the class B franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.011.png" width="190" height="56" alt="Start formula Amount of the class C franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` #### 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus): (a) a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Original surplus</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:85.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>class A</span></p></td><td style="width:220.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.012.png" width="169" height="38" alt="Start formula Amount of the original class A surplus times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.013.png" width="169" height="38" alt="Start formula Amount of the original class B surplus times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.014.png" width="169" height="38" alt="Start formula Amount of the original class C surplus times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (4) If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit): (a) a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company. (5) The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking deficit into 1997 Act franking debit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Original deficit</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking debit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(4)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:70.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A</span></p></td><td style="width:235.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.015.png" width="164" height="38" alt="Start formula Amount of the original class A deficit times start fraction 39 over 61 end fraction end formula "></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.016.png" width="164" height="38" alt="Start formula Amount of the original class B deficit times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.017.png" width="164" height="38" alt="Start formula Amount of the original class C deficit times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (2) A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if: (c) the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions. (3) The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if: (b) the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and (1) While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit. (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year. (3) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: > Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act. (1) The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account. (a) a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time; (3) If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if: (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity. #### 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If: the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time. (1) Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections. (2) If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year. Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year. Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year. (5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in: that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement. (6) The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (7) The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (2) The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (3) The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (i) are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and (a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and (b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section. (a) whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and (1) This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002. (a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and (3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded. (1) This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002; (2) If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (3) If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (4) If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. (5) If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows: (a) any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and (i) in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and (ii) in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. #### 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF.  #### 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act). (2) If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus): (a) a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF. (4) If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit): (a) a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF. This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period). (1) The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period: (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (1) The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period. (2) The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner. (3) The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5. (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and (d) the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner; the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received. (3) A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time: (1) A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends. (2) However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period. (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (a) the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed: (d) the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and (e) the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return. (2) The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day. (1) The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period. (2) The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made. Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period. (b) on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax); the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed: (c) the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and (d) the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return. (2) The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day. The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period: If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day. If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and If: (a) a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and (b) the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment; In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment. If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment. The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with. If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953. (1) Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period. (a) the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and (b) the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3); the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on: (c) if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or If: Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax. Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division. If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997. (a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day: (3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002. (a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002: > Note: As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date. (b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997. In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003. (1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year. (a) a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of: (i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time; (iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period; (2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if: (b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time: (ii) the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. > Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. > Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. (7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table: <table cellspacing="0" cellpadding="0" style="width:365.35pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount of the franking credit and the exempting debit</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">If:</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the credit and debit is:</span></p></td></tr></thead><tbody><tr><td style="width:22.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The period starts immediately after 7.30</span><span> </span><span>pm by legal time in the Australian Capital Territory on 13</span><span> </span><span>May 1997</span></p></td><td style="width:141.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Both these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was not in surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>All these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was in surplus at the start of the period;</span></p><p class="Tablea"><span>(c) the surplus in the account at the switch time is greater than the surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the franking surplus in the Australian company’s franking account at the switch time; and</span></p><p class="Tablea"><span>(b) the franking surplus in the Australian company’s franking account at the start of the period</span></p></td></tr></tbody></table> ``` (a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and (b) the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period. Subdivision 235‑I of the Income Tax Assessment Act 1997 applies to assets acquired by the trustee of an instalment trust in: (1) Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years. (2) However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time). (3) The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997. Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997. (2) Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in: (1) Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that: (b) is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose. (a) if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007. > Note: To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997. (b) contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option; the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option. (3) For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5). (4) If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is: (a) the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less (b) the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest. (5) If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is: (6) If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil. (1) If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one. (2) If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year. (3) If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year. (a) for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and (b) for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year: Step 1. Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. Step 2. Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3). Step 3. If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year. > Note: Example: Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75): (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred: (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times: (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate. Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008. (a) the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and (b) the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities: (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (i) the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or (ii) the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and (f) none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made: (i) Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event; (ii) a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year. (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (b) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (c) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year #### 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year (a) the requirements set out in paragraphs 275‑610(1)(a), (b) and (c) of the Income Tax Assessment Act 1997 are satisfied in respect of an amount of non‑arm’s length income of a managed investment trust in relation to an income year; and (b) the managed investment trust became a party to the scheme mentioned in paragraph 275‑610(1)(a) of that Act before the day on which the Bill that became the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 was introduced into the House of Representatives; and Division 276 of the Income Tax Assessment Act 1997 as inserted in that Act by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (the amending Act) applies as set out in subitem 1(1) of Schedule 8 to the amending Act. (b) if the trustee of the trust has made a choice for the purposes of paragraph 1(1)(b) of Schedule 8 to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016—the first income year starting on or after 1 July 2015; or (c) if the trustee of the trust has made a choice for the purposes of subparagraph 276‑10(1)(e)(i) of the Income Tax Assessment Act 1997 in respect of the 2016‑17 income year—that income year. (c) the trust is an AMIT for an income year (the discovery year) that is the starting income year or a later income year. (1) This section applies if the trust has an under or over of a character in the discovery year relating to the base year. (b) if, at a time, the trust sent its members distribution statements for an income year that is prior to the starting income year—assume that the trust sent those members AMMA statements for that income year at that time. (3) For the purposes of Division 276 of the Income Tax Assessment Act 1997, treat the under or over mentioned in subsection (1) as an under or over of the AMIT, in the discovery year relating to the base year, of the character mentioned in that subsection. (a) had the under or over mentioned in subsection (1) been discovered before the starting income year, this Act would have operated to produce a particular effect (the pre‑AMIT scheme effect) for the base year in relation to the amount or amounts reflected in the under or over; and 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT #### 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT (b) working out the amount (if any) of the entity’s capital gain under subsection 104‑70(4) of the Income Tax Assessment Act 1997. (3) For the purpose of working out the amount of the non‑assessable part mentioned in paragraph 104‑70(1)(b), treat the following provisions as being in operation at the time the payment was made: (b) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in paragraph (a). (4) Subsection (3) does not apply to the extent (if any) that the entity, in the income tax return that it lodged for the income year in which the payment was made, included the amount of the payment in its assessable income for that income year. (5) For the purposes of section 118‑20 of the Income Tax Assessment Act 1997, treat this section as being in Part 3‑1 of that Act. (2) The Commissioner cannot amend the entity’s assessment for the income year in which the payment was made in a particular way if: (b) the Commissioner could not amend the assessment in that way if the following provisions were in operation at the time the payment was made: (ii) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in subparagraph (i); and Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82‑10F). (2) The object of this section is to apply (with modifications) provisions limiting deductibility in respect of certain contributions made during the period that: (a) Subdivisions AA and AB of Division 3 of Part III of the Income Tax Assessment Act 1936, as in force just before they were repealed by the Superannuation Legislation Amendment (Simplification) Act 2007; (b) any other provision of the Income Tax Assessment Act 1936, or of any instrument made under that Act, to the extent that it relates to the operation of those Subdivisions; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of those Subdivisions. (b) the deduction limit mentioned in section 82AAC for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (c) the deduction limit mentioned in section 82AAT for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (d) Division 290 of the Income Tax Assessment Act 1997 did not apply to contributions made during the income year mentioned in paragraph (a). (2) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of a defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection and subsection (4), the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 5 September 2006; (b) the defined benefit interest mentioned in paragraph (2)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 5 September 2006, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (2)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (4) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of the defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection, the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 12 May 2009; (b) the defined benefit interest mentioned in paragraph (4)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 12 May 2009, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (4)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (1) The object of this section is to apply (with modifications) provisions relating to excess non‑concessional contributions tax in respect of certain contributions made during the period that: (b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision. (ea) in a case where paragraph 292‑95(1)(b) of that Act would have allowed the contribution mentioned in that paragraph to be made at a time within that period—that paragraph allowed the contribution to be made on or before 30 June 2007; and (f) paragraph 292‑95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and (fa) in a case where subsection 292‑100(2), (4), (7) or (8) of that Act would have allowed the contribution mentioned in that subsection to be made at a time within that period—that subsection allowed the contribution to be made on or before 30 June 2007; and (g) paragraph 292‑100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and (h) contributions made during that period that are covered under section 292‑100 of that Act reduce the person’s CGT cap amount for the 2007‑2008 financial year in accordance with subsection 292‑105(2) of that Act (and despite subsection (1) of that section); and (i) if the conditions in subsection (4) are satisfied—the person’s excess non‑concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and (b) the Commissioner gives the person a transitional release authority under subsection 292‑80A(2) in response to the application; and (c) the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292‑80B within 21 days after the date of the release authority; and (d) the superannuation provider pays the person the amount required under section 292‑80C in relation to the transitional release authority. (b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act). (6) The amount to be included in the first person’s amount of non‑concessional contributions under subparagraph (3)(b)(ii) is the sum of: (a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and (b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made. (c) under Division 295 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)), the contribution is included in the assessable income of the superannuation provider in relation to the superannuation plan to which the contribution is made; and (8) For the purposes of paragraph (7)(b), treat the person as an employee of the other entity if the person would be treated as an employee of the other entity under Division 290 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)). (1) A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007. (2) The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292‑80(3)(b)(i), the person would have excess non‑concessional contributions for the financial year mentioned in paragraph 292‑80(3)(a). (4) For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out: The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 21 days after the date of the release authority. (1) A superannuation provider that has been given a transitional release authority in accordance with section 292‑80B must pay to the person within 30 days after receiving the release authority the least of the following amounts: (a) if the person requests the provider in writing to pay a specified amount in relation to the release authority—that amount; (c) the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person in complying superannuation plans. > Note 1: Section 288‑95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection. > Note 2: Section 288‑100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority. > Note 3: For reporting obligations on the superannuation provider in these circumstances, see section 390‑65 in Schedule 1 to the Taxation Administration Act 1953. (2) The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person in complying superannuation plans. (3) Section 307‑125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section. (a) your non‑concessional contributions cap for the 2015‑2016 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsection 292‑85(7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 applies after the commencement of this section as if: (d) subsection 292‑85(6) of that Act as so amended had been applied (taking into account paragraph (c) of this subsection) for the purposes of working out your non‑concessional contributions cap for the 2016‑2017 financial year. (2) For the purposes of working out your non‑concessional contributions caps for the 2017‑2018 financial year and the 2018‑2019 financial year, if: (a) your non‑concessional contributions cap for the 2016‑2017 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsections 292‑85(6) and (7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 apply after the commencement of this section as if the amount worked out under subsection 292‑85(5) of that Act as so amended were $380,000. (3) To avoid doubt, this section does not affect your non‑concessional contributions cap for any financial year that ended before 1 July 2017. The tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your non‑concessional contributions (see section 292‑90 of the Income Tax Assessment Act 1997) for the financial year. (2) Subject to section 294‑55, the amendments of Division 294 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Treasury Laws Amendment (2017 Measures No. 2) Act 2017 apply on and after 1 July 2017. Despite sections 294‑30 and 294‑140 of the Income Tax Assessment Act 1997 (which are about when you have excess transfer balance), you do not have excess transfer balance in your transfer balance account on any day in the period of 6 months beginning on 1 July 2017 if: (a) the only transfer balance credits in the account in that period arose under item 1 of the table in subsection 294‑25(1) of that Act (which is about superannuation income streams you have just before 1 July 2017); and (b) the sum of those transfer balance credits exceeds your transfer balance cap, but is less than or equal to $1,700,000; and (c) at the end of the period, the sum of all the transfer balance debits arising in your transfer balance account equals or exceeds the amount of the excess from paragraph (b). (1) Despite subsection 294‑10(2), a transfer balance credit arises under item 4 of the table in subsection 294‑25(1) of the Income Tax Assessment Act 1997 only in relation to a borrowing that arises under a contract entered into on or after 1 July 2017. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2017 is treated as if it arose under a contract entered into before 1 July 2017 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) on 1 July 2017, a transfer balance debit arose in your transfer balance account under item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997; and (b) the sum of all the transfer balance credits that arise in your transfer balance account under item 1 of the table in subsection 294‑25(1) of that Act exceeds the amount that would, apart from this section, be the amount of that debit. (2) Despite column 2 of item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997, the amount of the transfer balance debit is instead equal to the sum worked out under paragraph (1)(b) of this section. 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain > The object of this Subdivision is to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the following legislative changes: (a) the introduction of a transfer balance cap (as a result of Schedule 1 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016); (b) the exclusion of transition to retirement income streams (and similar income streams) from being superannuation income streams in the retirement phase (as a result of Schedule 8 to that Act). (a) starting on the start of the day on which the Bill that became the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 was introduced into the House of Representatives; and (a) at the start of the pre‑commencement period, a CGT asset of a fund is a segregated current pension asset of the fund; and (i) at a time (the cessation time) in the pre‑commencement period, the asset ceases to be a segregated current pension asset of the fund; or (ii) at the start of 1 July 2017 (also the cessation time), the asset ceases to be a segregated current pension asset of the fund because it supports a superannuation income stream covered by subsection 307‑80(3) of the Income Tax Assessment Act 1997; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (b) the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year is greater than nil; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and #### 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑115(3)(a), the fund makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the fund’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Subsection 295‑390(1) of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). > 2016‑17 non‑exempt proportion means 1 minus the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year. #### 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset (i) the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997 in respect of the trust for the 2016‑17 income year; (ii) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year; and (d) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and #### 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑125(3)(a), the trust makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the trust’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Section 295‑400 of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). (a) unless paragraph (b) applies—1 minus the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997; or (b) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage worked out by subtracting the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year from 100%. This Subdivision applies to an entity that is the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust. For the purposes of this Subdivision, an asset is a 30 June 1988 asset of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust if the entity owned it at the end of 30 June 1988. > Note: Section 295‑90 of the Income Tax Assessment Act 1997 treats these assets as having been acquired on 30 June 1988. (1) The first element of the cost base of each 30 June 1988 asset of the entity’s is the greater of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). (2) The first element of the reduced cost base of each 30 June 1988 asset of the entity’s is the lesser of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). the market value of the asset as at the end of 30 June 1988 is the average of the highest and lowest trade prices for identical assets recorded on 30 June 1988 in whichever of the following markets is applicable: (d) if, on that date, there was a State capital city market (other than the Sydney market) that recorded a higher volume of trading than the Sydney market in identical assets—that State capital city market; (2) For the purposes of this section, an asset is taken to have been listed on an Australian stock exchange on 30 June 1988 if, and only if, on that day the asset had the status of having been granted official quotation by a securities exchange within the meaning of the former Securities Industry Act 1980 or the law of a State or Territory corresponding to that former Act. (b) at any time during the period commencing at the time when the shares were acquired and ending at the end of 30 June 1988, the company paid an amount that was not a dividend to the entity in respect of the shares; (b) at any time during the period commencing at the time when the interest or unit was acquired and ending at the end of 30 June 1988, the trustee of the trust paid an amount to the entity in respect of the interest or unit, being: (i) in a case where the entity was exempt from tax for the year of income in which the payment was made—an amount that, if the entity had not been exempt from tax, would not have been the entity’s assessable income; or the cost base to the entity of the interest or unit as at 30 June 1988 is reduced by so much of the amount as is not attributable to a deduction allowed under former Division 10C or 10D of the Income Tax Assessment Act 1936. (1) Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (2) and (3) of this section apply if an entity exercises rights or options as mentioned in that section to acquire: (b) the greater of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (b) the lesser of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (4) The payment referred to in subsection (2) or (3) can include giving property. To the extent that the payment does, use the market value of the property in working out the amount of the payment. (1) A notice given under subsection 82AAT(1A) or (1CB) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑170 of the Income Tax Assessment Act 1997. (2) A notice given under subsection 82AAT(1C) or (1CD) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑180 of the Income Tax Assessment Act 1997. (1) A proportion of the ordinary income and statutory income of a continuously complying fixed interest ADF of an income year that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).  > Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the income year. > Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the income year. (4) A choice for the purposes of the definition of reckoning time in subsection (5) must be made on or before the date of lodgment of the income tax return of the ADF for the income year to which the choice relates, or before a later day allowed by the Commissioner. > continuously complying fixed interest ADF, in relation to an income year (the current year), means a fund that is a fixed interest complying ADF in relation to each of the following years: > current 25 May balance, in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time: (b) subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 September 1989 is to be added to the balance; (b) a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that day, made a deposit with the ADF that consisted wholly or partly of the roll‑over (as defined in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 as in force on that day) of an eligible termination payment as so defined, being an eligible termination payment that included a concessional component (as so defined). > fixed interest complying ADF, in relation to a year of income, means a complying ADF where both of the following conditions are satisfied: (a) not less than 90% of the amount that, apart from this section, would be the assessable income of the ADF of the income year (other than non‑arm’s length income or amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997) consists of any one or more of the following: (ii) any profit arising on the disposal, redemption, cancellation or maturity of a CGT asset referred to in paragraph 295‑85(3)(b) of the Income Tax Assessment Act 1997; (iii) an amount included in assessable income under Division 16E of Part III of the Income Tax Assessment Act 1936 (or would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply); (ii) virtual PST life insurance policies (as defined in the Income Tax Assessment Act 1997) issued by a life insurance company. > original 25 May balance, in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988. > reckoning time, in relation to an ADF in relation to an income year, means the beginning of the income year, or such other time during the income year as the ADF chooses in accordance with subsection (4). (6) This section does not apply to an ADF in relation to an income year unless the whole of the benefit that would accrue to the ADF from the application of this section in relation to the income year has been, or can reasonably expected to be, passed on to eligible depositors. An election made by the trustee of a complying superannuation fund under subsection 279(4) of the Income Tax Assessment Act 1936 that had effect for the income year of the fund in which 30 June 2007 occurs continues to have effect as if it had been made under section 295‑465 of the Income Tax Assessment Act 1997. Subdivisions 295‑I (no‑TFN contributions) and 295‑J (Tax offset for no‑TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006‑2007 income year ends on a day (the end day) after 1 July 2007 as if: (b) the entity’s no‑TFN contributions income for the entity’s 2007‑2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007‑2008 income year if the contributions concerned had been made in the entity’s 2007‑2008 income year. (2) Division 301 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section because you are a member of the fund in the same way as it would apply if the payments were superannuation member benefits paid to you from a complying superannuation fund. For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. Subdivision 301‑F of the Income Tax Assessment Act 1997 applies in relation to income years starting on or after 1 July 2007. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to the following in respect of an income year that starts on or before 1 July 2021: (b) the amendments of the Income Tax Assessment (1997 Act) Regulations 2021 made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023. (a) a superannuation benefit (the trigger benefit) was paid to a person in the 2020‑21 income year or an earlier income year; and (c) the trigger benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; and (2) The Commissioner cannot amend an assessment on the basis that a superannuation benefit paid to the person is a superannuation income stream benefit because of the amendments made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 if: (iii) the superannuation benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (a) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (b) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. (1) The Minister may, by legislative instrument, make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions) that: (a) relate to the amendments or repeals made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023; and (2) Without limiting subsection (1), rules made under this section before the end of the period of 12 months starting on the day that Schedule commences may provide that provisions of that Schedule, or any other Act or instrument, have effect with any modifications prescribed by the rules. Those provisions then have effect as if they were so modified. (2) Division 302 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section after another person’s death, because the other person was a member of that fund, in the same way as it would apply if the payments were superannuation death benefits paid to you from a complying superannuation fund. For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if: (b) just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. (2) For the purposes of Subdivision 82‑B of Division 82, Division 302 and section 303‑5 of the Income Tax Assessment Act 1997, the definition of death benefits dependant in section 302‑195 of that Act applies as if paragraphs (a) and (b) of the definition were replaced with the following paragraphs: (a) a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008 or a person who was formerly such a spouse; or (b) a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008, who is aged less than 18. (ii) a superannuation guarantee payment, a small superannuation account payment, an unclaimed money payment, a superannuation co‑contribution benefit payment or a superannuation annuity payment. (2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you at a time in the period: (i) a condition of release specified in item 107A or 207AA of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; or (ii) a condition of release specified in item 109AA of the table in Schedule 2 to the Retirement Savings Accounts Regulations 1997. (1) This section applies to a superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with section 292‑80B. (2) The superannuation benefit is not assessable income and is not exempt income to the extent that it does not exceed the amount mentioned in subsection (3). (3) The amount is the amount of excess non‑concessional contributions stated in the release authority in accordance with paragraph 292‑80A(3)(a), reduced (but not below zero) by the amount of any superannuation benefit that was not assessable income and not exempt income under a previous operation of subsection (2) in relation to the release authority. (4) The superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3). (a) you have an interest in a FIF (within the meaning of Part XI of the Income Tax Assessment Act 1936, as in force just before the commencement of item 37 of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010) (the paying fund); and (b) Subdivision 305‑B of the Income Tax Assessment Act 1997 applies in relation to the paying fund (see section 305‑55 of that Act); and (c) the paying fund transfers an amount to a complying superannuation fund in respect of you during the deduction year; and (d) you choose under section 305‑80 of the Income Tax Assessment Act 1997 that the amount, or part of the amount, is to be treated as assessable income of the complying superannuation fund; and (e) immediately before the transfer happens, there is a post‑FIF abolition surplus (within the meaning of the Income Tax Assessment Act 1936) for the paying fund in relation to you; and For the purposes of the definition of specified roll‑over amount in the Income Tax Assessment Act 1997, treat the taxable component of a directed termination payment (within the meaning of section 82‑10F) as the element untaxed in the fund of a superannuation benefit that is a roll‑over superannuation benefit. (1) This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007. > Note: This section also applies to an income stream replacing an earlier one because of an involuntary roll‑over (see section 307‑127). (2) Despite subsection 307‑125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows: (a) first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007); (b) next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits. The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit. (3) Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened: (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day; (ba) the holder of the superannuation interest is aged 60 or above on 1 July 2007, if none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day. (a) treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and (b) work out the tax free component of the superannuation interest for the purposes of section 307‑125 of the Income Tax Assessment Act 1997 under subsections (6) and (6A). (i) an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and (ii) the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time; (b) next, work out the unused undeducted purchase price (within the meaning of paragraph (a) of the definition of that term in subsection 27A(1) of the Income Tax Assessment Act 1936 just before the commencement of this section, and disregarding paragraphs (b) and (c) of that definition) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007; (c) next, work out the pre‑July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this section) of the eligible termination payment. (a) at least one superannuation income stream benefit was paid from the superannuation income stream before 1 July 1994; or (b) section 27AAAA of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007) applied to the superannuation income stream just before 1 July 2007; (7) For the purposes of paragraph (6)(c), disregard the value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment. (8) If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as: (b) if 1 or more other events mentioned in subsection (3) happened before the commutation—the time just before the earliest of those events happens. (a) references in that section to the later income stream (in relation to a time, or event happening, before the payment of that involuntary roll‑over superannuation benefit) include references to the earlier income stream; and (b) references in that section to the superannuation interest supporting the later income stream (in relation to a time, or event happening, before the payment of that benefit) include references to the earlier interest. (1) This section applies for the purposes of working out the amount of your total superannuation balance just before 1 July 2017. (2) The transfer balance mentioned in paragraph 307‑230(1)(b) of the Income Tax Assessment Act 1997 just before 1 July 2017 is taken to be equal to: (a) the sum of the transfer balance credits (if any) in your transfer balance account just after the start of 1 July 2017; less (b) the sum of the transfer balance debits (if any) arising in your transfer balance account on 1 July 2017 under item 4 of the table in subsection 294‑80(1) of that Act (about payment splits). (1) Section 307‑231 of the Income Tax Assessment Act 1997 applies in relation to borrowings that arise under contracts entered into on or after 1 July 2018. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2018 is treated as if it arose under a contract entered into before 1 July 2018 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) treat a deduction made under former section 279 of the Income Tax Assessment Act 1936 as having been made under section 295‑465 of the Income Tax Assessment Act 1997 instead; and (b) treat a deduction made under former section 279B of the Income Tax Assessment Act 1936 as having been made under section 295‑470 of the Income Tax Assessment Act 1997 instead. If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007‑2008 income year is, despite subsection 307‑345(1), the total of: (b) the amount by which $140,000 exceeds the upper limit for the 2006‑2007 income year (worked out under section 159SG of that Act). Division 316 of the Income Tax Assessment Act 1997 applies in relation to demutualisations occurring on or after 1 July 2008. If: (a) any assets held by the benefit funds of a life insurance company that is a friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a complying superannuation fund; and (b) the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer; the transfer is disregarded for any purposes of the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936. (1) In working out the amount that a life insurance company can deduct, in respect of life insurance policies that are disability policies (other than continuous disability policies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income. (2) In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection (1) applies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company’s liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320‑85(4) of that Act. If: (2) If the life insurance company wishes to include a part of an approved asset in its virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑87(2) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society establishes a virtual PST in the 2000‑01 income year, the calculation of the transfer values of the company’s virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year. (1) Subsection (3) applies for the purposes of subparagraph (b)(i) of the definition of virtual PST life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 259 of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007. (2) Subsection (3) also applies for the purposes of subparagraph (b)(i) of the definition of complying superannuation/FHSA life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 47 of Schedule 7 to the First Home Saver Accounts (Consequential Amendments) Act 2008. (3) Treat an annuity as having been purchased out of a superannuation lump sum or an employment termination payment, if the annuity was purchased: (b) out of an eligible termination payment (within the meaning of the Income Tax Assessment Act 1997, as in force just before the commencement mentioned in subsection (1) of this section). (2) If the life insurance company wishes to include a part of an approved asset in its segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (a) a life insurance company had a liability before 1 July 2000 under a life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and (c) there is a transfer of the company’s assets to the segregated exempt assets to meet that liability or that part of the liability; (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑105(1) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320‑225 of the Income Tax Assessment Act 1997 in the 2000‑01 income year, the calculation of the transfer values of the company’s segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year. Section 322‑25 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Part VC of the Insurance Act 1973 after 17 October 2008. 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you > new Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force after the commencement of this section. > old Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. > STS taxpayer means an STS taxpayer within the meaning of Division 328 of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. #### 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years (1) This section applies for the purpose of working out whether you are a small business entity (other than because of subsection 328‑110(4) of the Income Tax Assessment Act 1997) for the 2007‑08 or 2008‑09 income year. (2) You work out your aggregated turnover for the 2005‑06 or 2006‑07 income year as if the amendments made by Schedule 1 to the Tax Laws Amendment (Small Business) Act 2007 had been in force in relation to that year. (a) your aggregated turnover for the 2005‑06 income year (worked out in accordance with subsection (2)) is $2 million or more; but (b) your STS group turnover for that year (worked out under Subdivision 328‑F of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section) is less than $2 million. (2) The following provisions apply as if you are a small business entity for the income year in which you are winding up the business: #### 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you (1) For the purpose of working out whether you are a small business entity for the 2007‑08, 2008‑09, 2009‑10 or 2010‑11 income year (each a relevant income year) for the purposes of a provision to which subsection (3) applies: (2) An entity (the first entity) controls a discretionary trust for a relevant income year if, for any of the 4 income years (a previous income year) before that year: (a) if the previous income year is before the 2007‑08 income year—the trustee of the trust made a distribution of $100,000 or more to the first entity, any of its affiliates, or the first entity and any of its affiliates; or (i) the trustee of the trust paid to, or applied for the benefit of, the first entity, any of the first entity’s affiliates, or the first entity and any of its affiliates, any of the income or capital of the trust; and (ii) the percentage (the control percentage) of the income or capital paid or applied is at least 40% of the total amount of income or capital paid or applied by the trustee for that year. (1) This section sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (2) This section also sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (3) Any ordinary income that, apart from paragraph 328‑105(1)(a) of the Income Tax Assessment Act 1997 (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have derived before the changeover year (while you were using the STS accounting method) and you have not included in your assessable income because you have not received it is included in your assessable income for the changeover year. (4) Any general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, that, apart from paragraph 328‑105(1)(b) of that Act (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have incurred before the changeover year (while you were using the STS accounting method) and that you have not deducted because you have not paid them can be deducted for the changeover year. (b) for any later income year for which you are a small business entity but only if you used the STS accounting method for the income year before that later year. > Note: Example: You are a small business entity for the 2007‑08 and 2008‑09 income years and you continue to use the STS accounting method for those years. You are not a small business entity for the 2009‑10 income year so you cannot continue to use the STS accounting method for that year. Because you cannot use the STS accounting method for the 2009‑10 income year, you will not be able to use it again for a later income year even if you are a small business entity for that later year. In sections 328‑115 and 328‑120, STS accounting method means the accounting method that was required by the Income Tax Assessment Act 1997 to be used by STS taxpayers for the 2004‑05 income year. (b) you made a choice under subsection 328‑175(3) of old Subdivision 328‑D in relation to a depreciating asset you use to carry on a primary production business and for which you could deduct amounts under Subdivision 40‑F or 40‑G of the Income Tax Assessment Act 1997. (2) In determining whether you can choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997 in an increased access year, disregard subsection 328‑175(10) of that Act. (3) In applying paragraph 328‑175(10)(b) of that Act for the purpose of determining whether you can choose to use that Subdivision in any income year after the increased access years, disregard: (4) Paragraph 328‑180(1)(b) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that paragraph to $1,000: (i) first used the asset, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (i) first used the asset, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (i) first used the asset, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, on or after 1 July 2023 and on or before 30 June 2026. (a) a reference in that paragraph to the end of the income year in which you start to use the asset, or have it installed ready for use, for a taxable purpose were a reference to the earlier of: if: (i) first used the asset, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021. (5) Paragraph 328‑180(2)(a) or (3)(a) of the Income Tax Assessment Act 1997 applies to an amount included in the second element of the cost of an asset as if a reference in that paragraph to $1,000: (5A) For the purposes of determining whether, under subsection 328‑180(2) of the Income Tax Assessment Act 1997, you can deduct, for an income year (the current year), the taxable purpose proportion of an amount included in the second element of the cost of an asset, disregard paragraph (b) of that subsection if: (2) For the purposes of determining whether subsection 328‑180(1) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (b) of that subsection (which sets a limit of $1,000 on the cost of the asset) if, in the period beginning at the 2020 budget time and ending on 30 June 2023, you: (3) For the purposes of determining whether subsection 328‑180(2) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (a) of that subsection (which sets a limit of $1,000 on the amount) if the amount is included in the second element of the cost of the asset at any time in the period beginning at the 2020 budget time and ending on 30 June 2023. (4) In applying paragraph 328‑180(3)(a) of the Income Tax Assessment Act 1997 to an asset, disregard an amount included in the second element of the cost of the asset if the amount is deducted under subsection 328‑180(2) of that Act, as modified by subsection (3) of this section. (5) Section 328‑210 of the Income Tax Assessment Act 1997 applies as if the words “less than $1,000 but” in subsection (1) were disregarded, in relation to a deduction for an income year that ends: Subsection 328‑190(2) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that subsection to 15% were a reference to 57.5% if you are covered by section 40‑125 for the asset (which is about backing business investment). (1) A depreciating asset of yours that had been allocated to your general STS pool is treated as being allocated to your general small business pool. (2) A depreciating asset of yours that had been allocated to your long life STS pool is treated as being allocated to your long life small business pool. (3) If you made a choice, under subsection 328‑185(5) of old Subdivision 328‑D, not to have a depreciating asset allocated to your long life STS pool, the choice has effect for the purposes of subsection 328‑185(5) of new Subdivision 328‑D. (1) This section applies if a depreciating asset of yours is treated as being allocated to your general small business pool or long life small business pool under section 328‑185. (2) The opening pool balance of your general small business pool or long life small business pool for the 2007‑08 income year is taken to be the closing pool balance of your general STS pool or long life STS pool, as the case requires, for the 2006‑07 income year, reduced or increased by any adjustment required under section 328‑225 of new Subdivision 328‑D (about change in the business use of an asset). (a) you were not an STS taxpayer for the 2006‑07 income year (because you stopped being an STS taxpayer before that time); but (b) you are a small business entity for the 2007‑08 income year or a later income year and you choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets for that income year; the opening pool balance of your general small business pool or long life small business pool includes the sum of the taxable purpose proportions of the adjustable values of depreciating assets allocated to the pool under subsection 328‑185(3) of new Subdivision 328‑D for that year. (1) This section applies for the purposes of applying Subdivision 328‑D of the Income Tax Assessment Act 1997 for the 2012‑13 income year and later income years. (2) A depreciating asset that had been allocated to your long life small business pool is treated as being allocated to your general small business pool. (a) the closing pool balance of your general small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under section 328‑225 of that Act; and (b) the closing pool balance of your long life small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under that section. (1) This section applies if you chose to stop being an STS taxpayer for the 2005‑06 income year or the 2006‑07 income year. (2) You cannot choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets until at least 5 years after the income year for which you chose to stop being an STS taxpayer. > Note: Subdivision 328‑D of the Income Tax Assessment Act 1997 continues to apply to depreciating assets that have been allocated to your small business pools even if you are not a small business entity, or do not choose to use that Subdivision, for an income year: see section 328‑220 of that Subdivision. (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct 20% of particular expenditure for your 2023‑24 income year if: (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (d) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑450 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (6) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (ii) if the provider is a registered body of a kind listed in paragraph (2)(b), (c) or (d)—the training is within the provider’s scope of registration for that kind of registered body; and (d) each enrolment, or arrangement, for the provision of the training is made or entered into at or after 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022; and > Note: Paragraphs (b) and (c) mean this section will not apply to expenditure for on‑the‑job training or training provided by you in house. (a) a registered higher education provider (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); (b) a NVR registered training organisation (within the meaning of the National Vocational Education and Training Regulator Act 2011); (c) a registered education and training organisation (within the meaning of the Education and Training Reform Act 2006 (Vic.)); (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct for your 2023‑24 income year an amount that is equal to the sum of: (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (3) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑460 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (4) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (b) you incur the expenditure in the period starting at 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022 and ending at the end of: (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (4) For the purposes of paragraphs (1)(c) and (2)(c), in working out whether you can deduct an amount of expenditure on a depreciating asset, assume that: (b) throughout that effective life, you will use the asset for a taxable purpose to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose. (a) 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑470(1) or (3) applies in relation to the income year; and > Note: The deduction relates to the period of 1 July 2023 to 30 June 2024. An entity may have deducted an amount under paragraph (a) for a previous income year if the entity has a substituted accounting period. (2) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑470 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (3) Sections 8‑10, 40‑215 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (c) you start to use the asset, or have it installed ready for use, for any purpose after 30 June 2023 but before 1 July 2024; and (d) you start to use the asset, or have it installed ready for use, for a taxable purpose at a time (the start time) that is: (e) you are a small business entity, or an entity covered by subsection (4), for the income year that includes the start time; and (h) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) a new reasonably comparable depreciating asset that uses a fossil fuel (other than a use of which that is merely incidental) is available in the market at the start time; (ii) if the asset is being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than the other asset; (iii) if the asset is not being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than a new reasonably comparable depreciating asset that is available in the market at the start time; or (i) a depreciating asset (other than an asset excluded under subsection (6)) that uses electricity, or energy that is generated from a renewable source, to be more energy efficient; (iv) the use of electricity, or energy that is generated from a renewable source, by another depreciating asset to be monitored. (a) the amount is included in the second element of a depreciating asset’s cost under paragraph 40‑190(2)(a) of the Income Tax Assessment Act 1997; and (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (d) you are a small business entity, or an entity covered by subsection (4), for the income year in which the expenditure is incurred; and (i) if the asset could use a fossil fuel (other than a use of which that is merely incidental)—the asset to only use electricity, or energy that is generated from a renewable source; (ii) if the asset uses electricity, or energy that is generated from a renewable source—the asset to be more energy efficient; (g) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) For the purposes of paragraph (1)(b) or (3)(b), in working out whether you can deduct an amount of expenditure assume that: (i) for the purposes of paragraph (1)(b)—to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose; or (ii) for the purposes of paragraph (3)(b)—to the same extent as you use it for a taxable purpose in the income year in which the expenditure is incurred. (b) expenditure (other than expenditure referred to in subparagraph (3)(e)(i)) on an asset that can use a fossil fuel (other than a use of which that is merely incidental); (c) an asset that solely or predominantly generates electricity from a renewable source (for example, photovoltaic cells) or expenditure on such an asset; (d) an asset, or expenditure, being capital works for which you can deduct an amount under Division 43 of the Income Tax Assessment Act 1997; > Note: Subsections (1) and (3) also do not apply to an item of trading stock because such an asset is not a depreciating asset: see section 40‑30 of the Income Tax Assessment Act 1997. A reference in each of the following provisions of the Income Tax Assessment Act 1997 to a registration under section 27A of the Industry Research and Development Act 1986 includes a reference to a registration under former section 39J of that Act: (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) the R&D entity cannot deduct an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from: (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D entity could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:22pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the R&D entity is taken to be able to deduct under subsection 355‑315(2) of the new Act that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the R&D entity’s assessable income for the event year under subsection 355‑315(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 for the asset, the R&D entity is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑446 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the R&D entity is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑465 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: Section 355‑315 of the new Act would otherwise apply for the event in a case where the R&D entity had new law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by an R&D partnership; and (i) the partner can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the partner chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D partnership could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the partner is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:21.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D entity</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D partnership</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the partner is taken to be able to deduct under subsection 355‑525(2) of the new Act the partner’s proportion of that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the partner’s assessable income for the event year under subsection 355‑525(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partner’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if one or more partners (including the partner) in the R&D partnership is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset, the partner is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑448 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the partner is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑467 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s deductions under section 355‑520 of the new Act mentioned in subsection (4A) of this section. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the partner for the event, do so apply to the partner for the event. > Note 1: Section 355‑525 of the new Act would otherwise apply for the event in a case where the partner had new law deductions. Item 7 of the table in subsection 57‑110(2) in Schedule 2D to the Income Tax Assessment Act 1936 applies as if the deduction rules set out in the final column of that item also included former sections 73BA and 73BH of the Income Tax Assessment Act 1936. For the purposes of step 1 of the method statement in subsection 355‑415(2) of the Income Tax Assessment Act 1997, also disregard amounts that have already been taken into account under former subsection 73B(14AA) of the Income Tax Assessment Act 1936 for the R&D entity, the grouped entity and the R&D activities for an earlier income year. (1) This section applies if, apart from former paragraph 73B(10)(a) of the Income Tax Assessment Act 1936, an eligible company could deduct advance R and D expenditure in one or more income years commencing on or after 1 July 2011. > Note: That deduction would be under former section 73B of that Act as that former section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (a) apart from Subdivision H (prepaid expenditure) of Division 3 of Part III of the Income Tax Assessment Act 1936, an eligible company can deduct an amount under former section 73B, 73BA, 73BH, 73QA, 73QB or 73Y of that Act for an income year commencing before 1 July 2011; and (c) apart from former paragraph 73B(10)(a) of that Act, the eligible company could deduct an amount, as a result of that application of that Subdivision, for an income year commencing on or after 1 July 2011. > Note: That deduction would be under that Act as it applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (3) Former paragraph 73B(10)(a) of that Act is taken to apply to those income years commencing on or after 1 July 2011 as if the reference in that former paragraph to section 39J of the Industry Research and Development Act 1986 were a reference to section 27A of that Act. (4) An expression used in this section that is also used in former section 73B of the Income Tax Assessment Act 1936 has the same meaning in this section as it has in that former section. This Subdivision applies to core technology (within the meaning of former section 73B of the Income Tax Assessment Act 1936) if: (a) you incurred core technology expenditure (within the meaning of that former section) in an income year commencing before 1 July 2011 in relation to the core technology under one or more contracts entered into at or after the time referred to in former subsection 73B(12) of that Act; and (b) that expenditure (the undeducted expenditure) cannot be deducted for the last income year commencing before 1 July 2011. (1) This section applies for the purposes of Division 40 of the Income Tax Assessment Act 1997, other than sections 40‑292 and 40‑293 of that Act, if the core technology (the asset) is a depreciating asset. (2) Disregard this section, including its effect on the amount you can deduct under section 40‑25 of that Act for the asset, for the purposes of working out: (3) The asset’s opening adjustable value for the first income year that commences on or after 1 July 2011 (the first new income year) is equal to the amount of the undeducted expenditure. (4) Subsection 40‑75(2) of the Income Tax Assessment Act 1997 applies to the asset as if the first new income year were a change year (within the meaning of that subsection). If the core technology is not a depreciating asset, you can deduct the undeducted expenditure in equal proportions over a period of 5 income years starting in the first income year commencing on or after 1 July 2011. To work out the film component (if any) of your tax loss for the 1997‑98 income year or a later income year, apply former section 375‑805 of the Income Tax Assessment Act 1997. If you incurred a film loss for the purposes of former section 79F (Film losses of 1989‑90 to 1996‑97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989‑90 to 1996‑97 income years, that film loss is the film component of your tax loss for that income year. (1) To work out your film loss (if any) for the purposes of the Income Tax Assessment Act 1997 for the 1989‑90 or a later income year, apply former section 375‑810 of that Act. (2) You can deduct in the 1997‑98 or a later income year your film loss for any of the 1989‑90 to 1996‑97 income years only to the extent that it has not already been deducted. (1) Division 392 of the Income Tax Assessment Act 1997 applies to assessments for the 1998‑99 income year and later income years. (a) it had applied to your assessment for each income year before the 1998‑99 income year for which Division 16 of Part III of the Income Tax Assessment Act 1936 applied in relation to your income; and (b) you had carried on a primary production business during each income year before the 1998‑99 income year when you carried on a business of primary production; and (c) for each income year before the 1998‑99 income year you had a basic taxable income equal to your taxable income for the income year for the purposes of Division 16 of Part III of the Income Tax Assessment Act 1936. > Note: Section 149A of the Income Tax Assessment Act 1936 identifies what your taxable income for an income year is for the purposes of Division 16 of Part III of that Act. Division 392 of the Income Tax Assessment Act 1997 does not apply to your assessment for the 1998‑99 income year or a later income year if you made an election under section 158A (Election that Division not apply) of the Income Tax Assessment Act 1936 relating to an income year before the 1998‑99 income year. 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 A reference in Division 393 of the Income Tax Assessment Act 1997 to a deduction under section 393‑5 of that Act for making a farm management deposit is taken to include a reference to a deduction under section 393‑10 in Schedule 2G to the Income Tax Assessment Act 1936, as in force just before the commencement of this section, if the deposit was made before the 2010‑11 income year. #### 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 (b) the deposit was made with an FMD provider as a result of a request to which section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, applied; the unrecouped FMD deduction in respect of the deposit at that time is equal to the amount of the unrecouped deduction (within the meaning of the former subsection 159GA(3) of the Income Tax Assessment Act 1936) in respect of the deposit immediately before it ceased to be a deposit under the Loan (Income Equalization Deposits) Act 1976. > Note: This means that the unrecouped deduction relating to the deposit under the Loan (Income Equalization Deposits) Act 1976 continues to apply (by becoming an unrecouped FMD deduction) when the deposit is transferred to an FMD provider as a farm management deposit. The Loan (Income Equalization Deposits) Act 1976 was repealed on 22 February 2005. If a beneficiary of a trust was covered by paragraph (c) of the definition of primary producer in section 393‑25 in Schedule 2G to the Income Tax Assessment Act 1936 in the 2009‑10 income year, treat subsection 393‑25(3) of the Income Tax Assessment Act 1997 as having applied to the beneficiary for the purpose of determining the maximum number of choices that the trustee may make under subsection 393‑27(2) of that Act for the 2010‑11 income year. (a) a farm management deposit of an owner was unclaimed moneys for the purposes of section 69 of the Banking Act 1959; and (2) For the purpose of subsection 393‑10(1) of the Income Tax Assessment Act, treat the repaid unclaimed moneys as a repayment of the deposit of the owner. (3) To avoid doubt, the payment of unclaimed moneys to the Commonwealth under section 69 of the Banking Act 1959 is not a repayment of the deposit of the owner for the purposes of Division 393 of the Income Tax Assessment Act 1997. 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 #### 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 If a farm management deposit was made with an FMD provider as a result of a request under section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, then: (a) subsections 393‑40(1) to (4) of the Income Tax Assessment Act 1997 apply as if the day the deposit was made was the day on which the deposit was originally made under the Loan (Income Equalization Deposits) Act 1976; and (1) A copyright collecting society to which section 51‑43 of the Income Tax Assessment Act 1997 applies, may elect that, from 1 July 2004, the section apply to all ordinary income, and statutory income, collected or derived by the society on or after 1 July 2004. Division 420 of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division. Subdivision 615‑C of the Income Tax Assessment Act 1997 applies to you with the modifications set out in this Subdivision if you chose to obtain a roll‑over involving \*shares or units that: (b) were your trading stock, or revenue assets, at the time immediately before that disposal, redemption or cancellation. (1) Disregard subparagraph 615‑45(a)(ii), and paragraph 615‑45(b), of the Income Tax Assessment Act 1997 if the roll‑over relates to \*shares that were disposed of, redeemed or cancelled. (2) For each of the \*shares in the interposed company that you acquired in return for those of your shares or units in the original entity that were your \*trading stock at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  (2) For the purpose of calculating any profit or loss on a future disposal, cessation of ownership, or other realisation of a \*share in the interposed company that you acquired in return for those of your shares or units in the original entity that were \*revenue assets at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  Subdivision 620‑A of the Income Tax Assessment Act 1997 applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. (1) Part 3‑90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Act (No. 1) 2002 and amended by: (2) Section 713‑50 of the Income Tax Assessment Act 1997 (about factors to consider in determining destination of distribution by non‑fixed trust) applies for the purposes of this Part in the same way as it applies for the purposes of Part 3‑90 of that Act. ### Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly‑owned subsidiary of the entity (the future head company) that became the head company of the group; or (ii) at some time during that period, the entity was a wholly‑owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (ii) it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (1) If a group is a transitional group, its head company may, subject to subsection (3), choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (3) If the choice is to be made after the end of the period mentioned in paragraph (2)(a) and before the end of the day mentioned in paragraph (2)(b), it cannot be made unless each entity in relation to which the conditions in subsection (5) are satisfied has agreed to it being made. (a) the entity (the leaving entity) ceased to be a subsidiary member of the group before the choice was made (in a subsection (3) case) or before the revocation took place (in a subsection (4) case); and (b) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; and (c) the asset had become that of the head company because that section applied when a chosen transitional entity (whether or not the same entity as the leaving entity) became a subsidiary member. Section 716‑855 applies for the purposes of this Division in the same way as that section applies for the purposes of Part 3‑90 of the Income Tax Assessment Act 1997. is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705‑B of that Act and with this Division. 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity Section 701‑10 (cost to head company of assets of joining entity) and subsection 701‑35(4) (setting value of trading stock at tax‑neutral amount) of the Income Tax Assessment Act 1997 do not apply to the assets of a chosen transitional entity. > Note: The fact that the head company inherits the entity’s history under section 701‑5 of that Act when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time. #### 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities (2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non‑chosen subsidiary) is worked out in a special way. (b) for each sub‑group (see subsection (6)) that exists in relation to the non‑chosen subsidiary—the sub‑group’s notional allocable cost amount (see subsection(5)) for the non‑chosen subsidiary. (4) The head company adjusted allocable amount for the non‑chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if; (b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of head company’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub‑group in relation to the non‑chosen subsidiary. (5) For each sub‑group that exists in relation to the non‑chosen subsidiary, there is a sub‑group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non‑chosen subsidiary if: (a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non‑chosen subsidiary and the entities comprising the sub‑group; and (c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub‑group membership interests (see subsection (6)) in relation to the sub‑group, and any such entity held those membership interests during the period when it actually held them; and (d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of chosen transitional entity’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub‑group. (6) If a chosen transitional entity holds membership interests in a non‑chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non‑chosen subsidiary: (a) the chosen transitional entity and each interposed non‑chosen subsidiary comprise a sub‑group in relation to the non‑chosen subsidiary (unless the non‑chosen subsidiary is included in a sub‑group in relation to another non‑chosen subsidiary); and (i) the membership interests that the chosen transitional entity holds directly in the non‑chosen subsidiary or in any of the interposed non‑chosen subsidiaries; (ii) the membership interests that each interposed non‑chosen subsidiary holds directly in the non‑chosen subsidiary or in any of the other interposed non‑chosen subsidiaries. #### 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities If any provision of the Income Tax Assessment Act 1997 would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply. > Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred. (1) This section has effect for the purposes of applying section 705‑70 (step 2 of allocable cost amount) of the Income Tax Assessment Act 1997 in relation to a transitional entity. (2) In spite of subsection 705‑70(1A) of that Act, if the amount of an accounting liability of the transitional entity would be different when it becomes an accounting liability of the transitional group, that difference is not taken into account in working out the amount of the liability. #### 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different (a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset (the roll‑over asset) for which there was: (ii) roll‑over relief under section 40‑340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and (i) became an asset of the head company when the transitional group came into existence because subsection 701‑1(1) (the single entity rule) of that Act applies; or differs at that time from what it would have been if the act, transaction or event that gave rise to the CGT event had not occurred in relation to the roll‑over asset; then the provisions mentioned in subsection (2) apply as if the act, transaction or event had not occurred in relation to the roll‑over asset. (a) the act, transaction or event mentioned in subsection (1) happened before a demerger and in connection with the demerger; and (b) before the transitional group came into existence, at least one of the following entities ceased to be a member of the demerger group because of the demerger: (i) the originating company in relation to the roll‑over, or the transferor in relation to the roll‑over relief, was a foreign resident; and (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as a transitional foreign‑held subsidiary of the group. #### 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets (1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied. (2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset. (a) the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and (b) former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset. (4) The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group. (6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses. #### 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets (b) just before the transitional group came into existence, the entity that became the head company held a pre‑CGT asset; and (d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre‑CGT asset and is held by the head company only because the entity is taken by subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company. (2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence. #### 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity (1) This section provides for an addition to the step 1 amount for working out under section 711‑20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity) that ceases to be a subsidiary member of the transitional group at a time (the leaving time), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701‑1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount for paragraph</span><span> </span><span>(2)(c)</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">If, because of the circumstances described in paragraphs</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(a) and (b):</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">The amount is:</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:180.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following provisions applied to the entity:</span></p><p class="Tablea"><span>(a) former section</span><span> </span><span>61A of the </span><span style="font-style:italic">Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(b) former Subdivision</span><span> </span><span>57</span><span>‑</span><span>I in Schedule</span><span> </span><span>2D to the</span><span style="font-style:italic"> Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(c) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(4) of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td><td style="width:148.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the amount treated as being the cost of the asset under that provision; and</span></p><p class="Tablea"><span>(b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>2</span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following subsections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span><span> applied to the entity:</span></p><p class="Tablea"><span>(a) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(5);</span></p><p class="Tablea"><span>(b) 58</span><span>‑</span><span>70(3)</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The amount treated as being the cost, or the first element of the cost, of the asset under that subsection</span></p></td></tr></tbody></table> ``` (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997, as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="4" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amounts and provisions for different dates of acquisition</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Date of the acquisition</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Amount</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Provision of Division</span><span style="font-weight:bold"> </span><span style="font-weight:bold">58 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> applying to the acquisition and the working out of the amount</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:76.7pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>160</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>220</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>After 30</span><span> </span><span>June 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>First element of the cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subsection</span><span> </span><span>58</span><span>‑</span><span>70(5)</span></p></td></tr></tbody></table> ``` > Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. > Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and ### Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: #### 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70‑45 to 70‑70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420‑51 to 420‑58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (a) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority‑owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority‑owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority‑owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority‑owned entity became a subsidiary member of the group, there was roll‑over relief under section 40‑340 of the Income Tax Assessment Act 1997. (a) while the asset is, because subsection 701‑1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, its tax cost setting amount is taken to be equal to the continuing majority‑owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711‑30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997. (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset becomes that of an entity (a new asset holder) other than the head company because subsection 701‑1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder) acquiring some or all of the membership interests in the new asset holder; and (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset is acquired by another entity (a new asset holder) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll‑over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value asset just before the acquisition; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 #### 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 (b) members of the consolidated group or the MEC group mentioned in subsection 104‑500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701‑1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701‑1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (3) If this section applies, neither subsection 104‑500(4) nor subsection 104‑500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year. ### Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C‑B); and (b) modifies certain rules in Part 3‑90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C‑C). > Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719‑2 and 719‑10 of this Act). 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership #### 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(ii) of that Act (see subsection 719‑2(3) of this Act). (b) a trust (a non‑resident trust) that does not meet the requirements in any item of the table in section 703‑25 of the Income Tax Assessment Act 1997. (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non‑resident company or a non‑resident trust; or Test entity must be a subsidiary member on assumption that non‑resident companies and non‑resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non‑resident company or non‑resident trust were a subsidiary member of the group. (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv). #### 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(iii) of that Act (see subsection 719‑2(3) of this Act). (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C‑10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3). If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C‑10 are met; and (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (ii) an entity that is a transitional foreign‑held indirect subsidiary of the group because of another application of this paragraph; Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign‑held indirect subsidiary would need to have satisfied the set of requirements in either section 701C‑10 or 701C‑15 (1) This Subdivision applies if an entity (the transitional foreign‑held joining entity) that is a transitional foreign‑held subsidiary or a transitional foreign‑held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time) the group comes into existence. (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign‑held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign‑held indirect subsidiary that becomes a subsidiary member at that time takes account of this. (a) section 701‑10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); apply, for the purposes of setting the tax cost of an asset of the transitional foreign‑held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign‑held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. > Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign‑held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign‑held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign‑held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign‑held subsidiary and the other entity. > Note 2: If the transitional foreign‑held joining entity is a transitional foreign‑held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705‑A of the Income Tax Assessment Act 1997, in its application in accordance with Subdivision 705‑B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company. Subsection 701‑35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax‑neutral amount) does not apply to the assets of the transitional foreign‑held joining entity if it is a transitional foreign‑held subsidiary. Section 701‑15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: (a) this section applies to each membership interest in the transitional foreign‑held subsidiary that is held by an entity (an eligible non‑resident) of a kind mentioned in subparagraph 701C‑20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign‑held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701‑1(2) of the Income Tax Assessment Act 1997 applies to the eligible non‑resident in the same way as it applies to the head company. Section 711‑5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: > Note: If the leaving entity is a transitional foreign‑held subsidiary (within the meaning of section 701C‑20 of the Income Tax (Transitional Provisions) Act 1997), this Division will, in accordance with subsection 701‑15(4) of this Act (see section 701C‑40 of the first‑mentioned Act), apply to membership interests that an eligible non‑resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity. (1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707‑C of the Income Tax Assessment Act 1997. (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period. (1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if: (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (d) the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997. (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: (1) The head company of a consolidated group may make a choice in the approved form to apply section 701D‑10 to another entity. (2) However, the head company cannot make that choice if subsection 701D‑10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (a) an asset of the head company because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701‑55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40‑77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40‑77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40‑285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount. (b) after the asset became an asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). > Note: The final entity will be different from the head company if an entity (the leaving entity) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40‑285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. > Note: The final entity will be entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701‑5 (the entry history rule) of that Act and perhaps also section 701‑40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity) became a subsidiary member of the group; and It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). > Note: In some cases, section 705‑47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40‑285(3) of this Act. If: (b) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and subsection 40‑285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701‑10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997. > Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997. (1) For the purposes of Part 3‑90 of the Income Tax Assessment Act 1997, this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960‑G of that Act whether the interest or right is a membership interest of the entity in the other entity. > Note: Under Subdivision 960‑G of the Income Tax Assessment Act 1997, a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001) apply to transactions in relation to the interest or right at the relevant time. Despite the amendments of section 703‑35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) If an entity (the joining entity) to which section 40‑75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time), this Subdivision applies in relation to: (ii) became assets of the head company of the group at the joining time because of section 701‑1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure. (1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). (2) If the joining entity could not deduct an amount under Subdivision 40‑B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701‑55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40‑35, 40‑37, 40‑40 or 40‑43 treated the joining entity as holding a notional asset. > Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705‑30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. (a) deductions under former Subdivision 330‑A, 330‑C or 330‑H of the Income Tax Assessment Act 1997, or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated an entity as holding because of the expenditure. (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); > Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40‑75(4) of this Act, but may have been reset since under Subdivision 40‑B of the Income Tax Assessment Act 1997. > Note 2: The effective life of a notional asset is specified by whichever one of sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act is relevant to the notional asset. (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (9) Section 705‑55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705‑45 of that Act. > Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705‑40 of the Income Tax Assessment Act 1997. (a) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701‑5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. > Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705‑305(3). (ii) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707‑A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member. 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value #### 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707‑320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor) other than the real loss‑maker mentioned in subsection 707‑315(1) of that Act for the bundle; and (b) both the real loss‑maker and the value donor became members of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (ca) neither the real loss‑maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (ii) a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (ii) section 713‑540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (2) It must have been possible for the real loss‑maker to have transferred the loss to the value donor under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss‑maker at the initial transfer time the amount worked out using the formula:  > Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707‑327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss‑maker to the transferee. > total of real loss‑maker’s non‑foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss‑makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) included in a bundle of losses: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. #### 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value (1) This section affects the calculation of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707‑325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936, in the bundle). > Note: This section does not affect the calculation of the real loss‑maker’s modified market value for other purposes (such as the real loss‑maker being a value donor for the purposes of another application of section 707‑325 of this Act). (3) One condition is that the event was an injection of capital directly into the real loss‑maker by the value donor mentioned in section 707‑325 of this Act. (c) that would have caused subsection 707‑325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss‑maker’s modified market value (even if no other events described in subsection 707‑325(4) of that Act had occurred), apart from this section. (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss‑maker (whether or not the event also involved either the value donor or the real loss‑maker); or (1) This section has effect for the purposes of working out under Subdivision 707‑C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707‑325, as if there were added to the modified market value of the real loss‑maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (c) the loss is not a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707‑A of that Act at the initial transfer time had the company: > Note: This section has effect even if the amount added to the real loss‑maker’s modified market value under section 707‑325 is nil because the value donor’s modified market value is nil. (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707‑325, as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (4) If the transferee mentioned in subsection 707‑325(1) chooses, sections 707‑310, 707‑335 (except paragraph 707‑335(2)(a)) and 707‑340 of the Income Tax Assessment Act 1997 (and subsections 707‑315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: > Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707‑325(1)(d) and (e) and subsection 707‑325(2) in an application of section 707‑325 separate from the application of that section mentioned in paragraph (1)(a) of this section. > Note: This means that a loss that provided a basis for section 707‑325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. (b) in connection with the requirement that it must have been possible for a company (the notional transferor) to transfer to another company (the notional transferee) for an income year a loss under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997. (b) ends immediately after the initial transfer time mentioned in subsection 707‑320(1) of the Income Tax Assessment Act 1997. > Note: For the purposes of identifying the trial year using the definition in section 707‑120 of the Income Tax Assessment Act 1997, the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time. (1) Subsection (3) of this section affects the calculation, under section 707‑325 of the Income Tax Assessment Act 1997 and section 707‑325 of this Act, of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (the formation time) the group became a consolidated group; and (b) the provisions described in subsection 707‑327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707‑327(1)(b) and (c) of this Act as if the bundle included the loss; and (d) subsection 707‑325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707‑325(1) of this Act chooses that this section apply in relation to the real loss‑maker. (2) Section 707‑325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. (3) Disregard for the purposes of subsection 707‑325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707‑325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or > Note: Disregarding such an event could have a direct or indirect effect on the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss‑maker’s modified market value calculated under section 707‑325 of the Income Tax Assessment Act 1997, if the real loss‑maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707‑325 of this Act to add an amount to the real loss‑maker’s modified market value for those purposes. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) that: (b) was transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from an entity other than the real loss‑maker. (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997. Disregard an event that is described in subsection 707‑325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707‑325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004. (1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss‑maker) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time) the transferee became the head company of a consolidated group; and (ii) the conditions in one or more of paragraphs 165‑15(1)(a), (b) and (c) did not exist in relation to the real loss‑maker; and (da) the real loss‑maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non‑transferred losses) of the same sort that the transferee made without a transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non‑transferred losses). (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. <table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Limit on utilising the losses</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For this income year:</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the losses that the transferee may utilise cannot exceed:</span></p></td></tr></thead><tbody><tr><td style="width:20.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:120.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The first income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span style="font-size:8pt; vertical-align:2pt">1</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The second income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) </span><span style="font-size:8pt; vertical-align:2pt">2</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the amount of the losses utilised for the income year mentioned in item</span><span> </span><span>1</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The third income year ending after the initial transfer time, or a later income year</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time</span></p></td></tr></tbody></table> ``` (4) Subdivision 707‑C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707‑A of that Act. > Note: This has 2 effects. First, Subdivision 707‑C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707‑A of that Act). (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). (7) This section does not limit the transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company. In working out when a choice may be made under subsection 707‑325(5), 707‑327(5), 707‑328A(4) or 707‑350(5), ignore losses to which section 713‑535 of the Income Tax Assessment Act 1997 applies. > Note: That section deals with losses transferred under Subdivision 707‑A of that Act from certain wholly‑owned subsidiaries of life insurance companies that are members of a consolidated group. Section 707‑405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act. (1) This section reduces the adjustable value of a notional asset that section 40‑35, 40‑37, 40‑38, 40‑40 or 40‑43 treats the head company of a consolidated group as holding, if: (b) that section treats the leaving entity as holding a notional asset because of section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997. > Note: Section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time. The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences. (1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event) happening involving an entity (the originating entity) and another entity (the recipient entity) if: (a) the event occurs in connection with a life insurance company (the member life insurance company) becoming a member of a consolidated group; and (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest) in a company or in another trust. (a) a life insurance company transfers an asset (also the original asset) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320‑200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset) to its segregated exempt assets where, apart from this Subdivision, section 320‑255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event) is made in connection with the life insurance company (also the member life insurance company) becoming a member of a consolidated group. (1) This Subdivision applies only if the originating entity (for a section 713‑505 case) or the life insurance company (for a section 713‑510 case) chooses that it apply. (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713‑510 of the Income Tax Assessment Act 1997; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713‑510 of the Income Tax Assessment Act 1997; and (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs. This Act, and the Income Tax Assessment Act 1997, apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group. (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain) that the originating entity would have made as a result of the deferral event is disregarded; and (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount) under paragraph 320‑15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (1) This section operates if, after the deferral event happens, another event (the new event) happens where the new event is: (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (i) the original asset being transferred to or from the company’s virtual PST under section 320‑180, 320‑185 or 320‑195 of the Income Tax Assessment Act 1997; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320‑235, 320‑240 or 320‑250 of that Act; or (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. > Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713‑505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (1) For a section 713‑505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713‑535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: (a) an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group at a time (the leaving time); and (b) but for the cessation of membership and section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision. Sections 716‑340 and 716‑345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. <table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:345.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Extended operation of sections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 1</span><br><span style="font-weight:bold">Sections</span><span style="font-weight:bold"> </span><span style="font-weight:bold">716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">340 and 716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">345 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> operate in relation to:</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 2</span><br><span style="font-weight:bold">In the same way as they operate in relation to:</span></p></td></tr></thead><tbody><tr><td style="width:5.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:161.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>46</span><span>‑</span><span>90 of that Act</span></p></td><td style="width:156.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>40</span><span>‑</span><span>455 of that Act</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software pool created under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure allocated to a software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Software, expenditure on which was in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>In</span><span>‑</span><span>house software, expenditure on the development of which is allocated to a software development pool</span></p></td></tr></tbody></table> ``` (1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: Section 703‑30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004. (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time) a wholly‑owned subsidiary of the entity that became the head company of the group (the head entity), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier‑1 company of the group at the formation time. Despite the amendment of section 719‑30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) Section 719‑160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719‑160(3) of the Income Tax Assessment Act 1997. (3) However, that effect of section 719‑160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division. (2) Paragraphs 701‑1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier‑1 company at the time the MEC group came into existence. (a) the entity and one or more other entities were members of a potential MEC group as eligible tier‑1 companies, throughout the period: (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier‑1 company, at the time the transitional group came into existence. To avoid doubt, sections 707‑325 and 707‑327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719‑305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707‑A of that Act. Subsection 719‑325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006. (1) A reference in an agreement to item 25 of the table in subsection 721‑10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: (1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: Division 725 applies to a scheme entered into on or after 1 July 2002. It also applies to a scheme entered into on or after 27 June 2002, but only if: ### Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (1) Division 727, as inserted by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 and amended by the New Business Tax System (Consolidation and Other Measures) Act 2003, applies to a scheme entered into on or after 1 July 2002. (b) a presumed indirect value shift that happens under the scheme and affects a realisation event that happens on or after 1 July 2002. (a) the economic benefits taken into account in determining that the scheme has resulted in that indirect value shift or presumed indirect value shift include economic benefits provided by: > Note: In that case, the consequences of the trigger event are worked out under Division 138 or 139 of the Income Tax Assessment Act 1997: see items 13 and 14 of Schedule 15 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002. (1) An indirect value shift does not have consequences under Division 727 of the Income Tax Assessment Act 1997 if, to the extent of at least 95% of their total market value, the greater benefits consist entirely of: (a) a right to have services that are covered by section 727‑240 of that Act provided directly by the losing entity to the gaining entity; or (d) if the losing entity’s 2002‑2003 income year ends before 30 June 2003—the start of the losing entity’s 2004‑2005 income year. (2) For the purposes of section 727‑850 (about a presumed indirect value shift affecting a realisation event) of the Income Tax Assessment Act 1997, subsection (1) of this section applies to the presumed indirect value shift: #### 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (2) Paragraph 727‑470(2)(a) of the Income Tax Assessment Act 1997 (as in force immediately before the commencement of this section) continues to have effect in relation to the indirect value shift as if the repeals and amendments made by Schedule 1, Parts 1 and 2 of Schedule 3 and Schedule 8 to the Tax Laws Amendment (Small Business) Act 2007 had not been made. ## Division 124 Replacement‑asset roll‑overs ## Subdivision 124 ‑C—Statutory licences ## 124‑140 New statutory licence—ASGE licen 124‑140 New statutory licence—ASGE licence etc. (i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and (ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and (c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and (f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997). (a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or ## 124‑141 ASGE licence etc.—cost base of i 124‑141 ASGE licence etc.—cost base of ineligible part (1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:  > total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part. (a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or (2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section. (3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1). ## 124‑142 ASGE licence etc.—cost base of a 124‑142 ASGE licence etc.—cost base of aquifer access licence etc. (1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences. > Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997. (c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets). (4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act. (5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act. ## Subdivision 124 ‑I—Change of incorporation ## 124‑510 Application of Subdivision 124‑I 124‑510 Application of Subdivision 124‑I of the Income Tax Assessment Act 1997 Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. ## Division 125 Demerger relief ## Subdivision 125 ‑B—Consequences for owners of interests ## 125‑75 Employee share schemes 125‑75 Employee share schemes Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement. ## Division 126 Roll‑overs ## Subdivision 126 ‑A—Merger of qualifying superannuation funds ## 126‑100 Merger of qualifying superannuat 126‑100 Merger of qualifying superannuation funds (a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and (2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time. ## Subdivision 126 ‑B—Transfer of life insurance business ## 126‑150 Roll‑over on transfer of life in 126‑150 Roll‑over on transfer of life insurance business (a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and (ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs. (2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer. (a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and (b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest; ## 126‑160 Effects of roll‑over 126‑160 Effects of roll‑over (2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event. (3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly. (4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly. <table cellspacing="0" cellpadding="0" style="width:362.55pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:351.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Creating a CGT asset</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">CGT event number</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Applicable amount</span></p></td></tr></thead><tbody><tr><td style="width:50.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D1</span></p></td><td style="width:290.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the incidental costs the originating company incurred that relate to the CGT event</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D2</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the option</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D3</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the right</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>F1</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred on the grant, renewal or extension of the lease</span></p></td></tr></tbody></table> ``` (5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day. ## 126‑165 References to Subdivision 126‑B 126‑165 References to Subdivision 126‑B of the Income Tax Assessment Act 1997 A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision. (a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and ## Division 128 Effect of death ## 128‑15 Effect on the legal personal repr 128‑15 Effect on the legal personal representative or beneficiary The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996. ## Division 130 Investments ## Subdivision 130 ‑A—Bonus shares and units ## 130‑20 Issue of bonus shares or units 130‑20 Issue of bonus shares or units (b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. (b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend. (3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities. ## Subdivision 130 ‑B—Rights ## 130‑40 Exercise of rights 130‑40 Exercise of rights (1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company. (2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred. (3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company. ## Subdivision 130 ‑C—Convertible notes ## 130‑60 Shares or units acquired by conve 130‑60 Shares or units acquired by converting a convertible note (1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of: (2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of: (3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note. ## Division 134 Options ## 134‑1 Exercise of options 134‑1 Exercise of options (1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised. ## Division 136 Foreign residents ## Subdivision 136 ‑A—Making a capital gain or loss ## 136‑25 When an asset is taxable Australi 136‑25 When an asset is taxable Australian property (b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and (ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act. ## Division 137 Granny flat arrangements ## Subdivision 137 ‑A—Granny flat arrangements ## Operative provisions Operative provisions (a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and (2) Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001 (the new Act) applies to the plant on this basis: (a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant’s opening adjustable value; and (b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and (c) if you excluded an amount from your assessable income under section 42‑290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999—the cost of the plant, and its opening adjustable value, are reduced by that amount; and (d) if subparagraph (1)(b)(ii) applies to you—you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi‑owner of the plant under the former Act continue. (3) If you were using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis: (a) for the diminishing value method—replace the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate you were using; and (i) replace the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate you were using; and (ii) increase the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note 1: Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced. > Note 2: Small business entities can choose to work out the decline in value of their depreciating assets under Division 328. (a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or (3) If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40‑70(1) or 40‑75(1) of the new Act that includes the plant’s effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and (2) For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets. (3) For a case where the plant is merged into another depreciating asset, section 40‑125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it. (b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and (a) you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and (b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU’s opening adjustable value. (1) Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001. (2) For a unit of software for which you were deducting amounts under Subdivision 46‑B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis: (d) you must use the same effective life you were using under Subdivision 46‑B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001. (1) This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day. (b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and (c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and (1) This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001. > Note: Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8). (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330‑80 of the former Act for your income year ending on 30 June 2001; and (c) in applying the formula in section 40‑75 of the new Act for the income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The remaining effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these: (i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and (ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (7) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and (b) the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of expenditure incurred in carrying on eligible quarrying operations—the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (i) you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day) after 30 June 2001; or (ii) the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day) after 30 June 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which the start day occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year. there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (1) This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330‑H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and (c) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (i) any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset); (i) any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (4) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (4) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (b) the expenditure would have been transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330‑H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for your income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (1) Despite subsections 40‑35(5), 40‑38(5) and 40‑40(4), there is no additional decline in the value of the notional asset referred to in those subsections if: (a) apart from this section, subsection 40‑35(5), 40‑38(5) or 40‑40(4) would apply because the real asset referred to in that subsection is disposed of; and (a) at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373‑35 of the former Act; and (b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day. (a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and (1) Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time). (2) Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time. (a) you have deducted or can deduct an amount under Subdivision 387‑G of the former Act for an amount (the qualifying amount) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and (b) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and (1) This section applies to you if you have deducted or can deduct an amount under Subdivision 400‑A of the former Act for an amount (the qualifying amount) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400‑A of the former Act. (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and (c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400‑15(3) of the former Act; and (1) Units of plant that you had allocated to a pool under Subdivision 42‑L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act. (a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and (c) in applying the formula in section 40‑70 of the new Act for your income year in which 1 July 2001 occurs—it has a base value equal to that opening adjustable value; and (d) you replace the component in the formula in subsection 40‑70(1) of the new Act that includes an asset’s effective life with the pool percentage you were using for the pool; and (e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40‑115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and (f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset. (3) An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item). > Note 1: You work out the decline in value of an item removed under this subsection under Subdivision 40‑B of the new Act, using the cost for it worked out under section 40‑205 of the new Act. (b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset. (2) The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year) in this way: (a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and (b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section. (a) for a unit of plant (including IRUs and expenditure on software that is not pooled)—its undeducted cost at the end of 30 June 2001; or (b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence—the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or (c) for transport capital expenditure—the entity’s amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or (d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (e) for expenditure on evaluating the impact on the environment of a project—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (f) for assets that were pooled under Subdivision 42‑M or 42‑L of the former Act—the closing balance of the pool at the end of 30 June 2001. (4) The asset’s base value for applying the formula in section 40‑70 of the new Act for the diminishing value method is that opening adjustable value. (5) The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an item of plant for which you were using the prime cost method—using the rules in section 40‑10 of this Act; and (c) for a unit of software for which the entity was deducting amounts under Subdivision 46‑B of the former Act—using the rules in subsection 40‑25(2) of this Act; and (f) for an amount of expenditure on evaluating the impact on the environment of a project—using the rules in section 40‑55 of this Act. (6) The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an amount of unrecouped expenditure under Division 330 of the former Act—using the rules in section 40‑35 of this Act; and (b) for an amount of transport capital expenditure under Division 330 of the former Act—using the rules in section 40‑40 of this Act; and (7) The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act. (a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑C of the former Act; or (b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑H of the former Act; or (c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387‑B of the former Act; or (d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; or (e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365. (9) The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001. (10) You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount). (11) You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount. (1) Subsections 40‑65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened: (b) you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act. (a) paragraph 40‑65(6)(a) of the Income Tax Assessment Act 1997 included both events set out in subsection (1) of this section; and (b) subsections 40‑65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events. (1) A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936. (2) An amount you have deducted or can deduct for a water facility under Subdivision 387‑B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40‑F of the new Act. (3) A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936. (a) you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40‑115 (about splitting a depreciating asset) or 40‑125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and (b) it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40‑72 of that Act; (2) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if: (c) it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40‑72 of that Act. (3) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset) before 10 May 2006 if: (b) the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and (d) it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40‑72 of that Act. (a) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you: (b) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001. (2) If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act. (3) Otherwise, Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section. (a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or (b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or (ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life. (1) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001. > Note: If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40\. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997. (1A) Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001. (1B) Subsection (1) applies to a mining, quarrying or prospecting right (the new right) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if: (i) the other company is a member of the same wholly‑owned group as the original holder and was a member of that group just before that day; and (ii) the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer. (1D) Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if: (b) the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001. (a) you acquired, under an interest realignment arrangement, an interest (a new interest) in a mining, quarrying or prospecting right; and (b) the interest was acquired in exchange for one or more other interests (old interests) in other mining, quarrying or prospecting rights; and Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001. (a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or (b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership; the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act. (3) An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that: (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act. (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act. (6) Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243. (7) An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if: (a) you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and (8) The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section. (c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act. (2) Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001. A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act. if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011. (2) The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011. (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset for an income year is the amount worked out under section 40‑130 if: (a) the income year is the year in which you start to use the asset, or have it installed ready for use, for a taxable purpose; and (b) subsection (2) (about businesses with turnover less than $500 million) applies to you for the year and for the income year in which you started to hold the asset (if that was an earlier year); and > Note 1: An effect of paragraph (1)(a) is that this Subdivision only applies to one income year per asset. See also subsection 40‑135(1). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $500 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. Exception—assets for which the decline in value is worked out under section 40‑82 or Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (3) However, this section does not apply to a depreciating asset for an income year if you work out the decline in value of the asset for the income year under any of the following: (1) For the purposes of paragraph 40‑120(1)(c) and section 328‑182, you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you: > Note: Section 328‑182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997. (i) entering into a contract under which you hold the post‑12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑12 March 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post‑12 March 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (8) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (9) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (10) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (1) For the purposes of section 40‑120, the decline in value for the income year in which paragraph 40‑120(1)(a) is satisfied (the current year) is: > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 12 March 2020 to 30 June 2020 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2020 to 30 June 2021. (a) 50% of the asset’s cost as at the end of the current year, disregarding any amount included in the second element of the asset’s cost after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997, assuming its cost were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (3) However, the amount worked out under subsection (2) for an income year cannot be more than the amount that is the asset’s cost for the year. (a) 50% of the sum of the asset’s opening adjustable value for the current year and any amount included in the second element of its cost for that year, disregarding any amount included in that second element after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997 assuming: (ii) for the prime cost method—the component “Asset’s \*cost” in the formula in subsection 40‑75(1) of that Act (as adjusted under that section) were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (b) for the prime cost method—the sum of its opening adjustable value for the income year and any amount included in the second element of its cost for that year. (1) The decline in value of a depreciating asset is not worked out under this Subdivision for an income year if this Subdivision already applied in working out the decline in value of the asset for an income year. (2) For an income year later than the year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (3) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (4) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) You may choose that the decline in value of a particular depreciating asset for an income year, and subsequent income years, is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the first income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. If this Subdivision applies to work out the decline in value of a depreciating asset you hold for an income year, no other provision of this Act or the Income Tax Assessment Act 1997 applies to work out that decline in value. (1) For the purposes of this Subdivision, you are covered by this section for a depreciating asset if, on or before 30 June 2023: (2) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (3) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or Exception—assets for which the decline in value is worked out under Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (a) the asset is allocated to a low‑value pool, or expenditure on the asset is allocated to a software development pool (see Subdivision 40‑E of the Income Tax Assessment Act 1997); or (b) you or another taxpayer has deducted or can deduct amounts for the asset under Subdivision 40‑F of the Income Tax Assessment Act 1997 (about primary production depreciating assets). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $5 billion; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this section. (ii) if the 2019‑20 income year ends on or before 6 October 2020—the sum of your ordinary income (if any) and statutory income (if any) for the 2019‑20 income year; and (c) the sum of the amounts worked out under subsection (3) for the 2016‑17, 2017‑18 and 2018‑19 income years exceeds $100 million. (b) next, work out the cost of each of those assets (including any amounts included in the second element of the asset’s cost at a time that is in the income year); (4) For the purposes of subsection (3), disregard an asset if, at the time you first used the asset, or had it installed ready for use, for a taxable purpose: (a) it was not reasonable to conclude that you would use the asset principally in Australia for the principal purpose of carrying on a business; or (5) For the purposes of paragraph (3)(b), to work out the cost of a depreciating asset that is capital works (see section 43‑20 of the Income Tax Assessment Act 1997): (a) disregard section 40‑45 of that Act and work out the cost of the capital works using Subdivision 40‑C of that Act; and (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under subsection (3) if: (a) where section 40‑155 covers you for the current year (regardless whether section 40‑157 also covers you for the current year)—an exclusion applies to you and the asset for the current year under section 40‑165 (about exclusions for businesses with turnover of $50 million or more); or (ii) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s start time occurs in the current year—the asset’s cost as at the end of the current year, disregarding any amount included in the asset’s cost after 30 June 2023; or (b) if the asset’s start time occurred in an earlier year—the sum of its opening adjustable value for the current year and any amount included in the second element of its cost for the current year, disregarding any amount included in the asset’s cost after 30 June 2023. > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 6 October 2020 to 30 June 2021 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2021 to 30 June 2022. (a) where paragraph 40‑160(2)(a) applies—section 40‑155 would not cover you for the income year if the reference in that section to $5 billion were instead a reference to $50 million; and (i) entering into a contract under which you hold the post‑6 October 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑6 October 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of satisfying paragraph 40‑160(1)(a) for the post‑6 October 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you already satisfied paragraph 40‑160(1)(a) of this Act for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (9) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (1) For the purposes of subsections 40‑160(2) and 40‑170(1A), an exclusion applies to you and an asset for an income year if any of the exclusions in this section applies in relation to the asset. (4) This exclusion applies in relation to the asset if the asset is available for use, at any time in the income year, by any of the following: (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under this section if: (ii) you started to use the asset, or have it installed ready for use, for a taxable purpose in an earlier income year; and (b) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under section 40‑82 of the Income Tax Assessment Act 1997—the amount worked out under subsection (3); or (b) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under Subdivision 40‑BA of this Act—the amount worked out under subsection (4); or Assets affected by section 40‑82 of the Income Tax Assessment Act 1997 (about assets costing less than $150,000, medium sized businesses) (a) the amount that would be the asset’s decline in value for the year under section 40‑82 of the Income Tax Assessment Act 1997, assuming the reference in subparagraph 40‑82(3A)(b)(ii) of that Act to 31 December 2020 were instead a reference to the 2020 budget time; and (a) the amount that would be worked out under paragraph 40‑130(2)(a) or (4)(a) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(a) and (4)(a) to 30 June 2021 were instead references to the 2020 budget time; and (c) the amount that would be worked out under paragraph 40‑130(2)(b) or (4)(b) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(b) and (4)(b) to “the amount worked out under paragraph (a)” were instead references to “the amounts worked out under paragraphs 40‑170(4)(a) and (b)”. (a) the amount that would be the asset’s decline in value for the year under Division 40 of the Income Tax Assessment Act 1997, disregarding any amounts included in the eligible second element worked out under section 40‑175 of this Act for the asset for the year; and The amount worked out under this section (the eligible second element) for a depreciating asset for an income year is the sum of any amounts included in the second element of the asset’s cost at a time that is in both of the following periods: (1) For an income year later than a year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (2) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (3) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) This section applies if the decline in value for a depreciating asset for an income year is worked out under this Subdivision, and at a time (the balancing adjustment time) in a later income year: (i) it becomes not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (b) none of the requirements in paragraphs 40‑295(1)(a), (b) or (c) of the Income Tax Assessment Act 1997 are satisfied in relation to the asset. (2) For the purposes of Subdivision 40‑D of the Income Tax Assessment Act 1997 assume that, at the balancing adjustment time, you stop using the asset, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again. (3) For the purposes of section 40‑180 of the Income Tax Assessment Act 1997 assume that the reference in item 3 of the table in subsection 40‑180(2) of that Act to “because you stop using it for any purpose expecting never to use it again” were instead a reference to “because of section 40‑185 of the Income Tax (Transitional Provisions) Act 1997”. (4) If a balancing adjustment event happens to a depreciating asset you hold because of this section, this Subdivision cannot apply to work out the decline in value of the asset for a later income year. (1) You may choose that the decline in value of a particular depreciating asset for an income year is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year. (1) Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40. (a) you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset: (ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and (4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day. (5) The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if: (i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or (ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and  > sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose. (7) Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens: (a) if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b). (i) an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and (ii) the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and (3) The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount. (a) on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and (c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and (ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal; (2) There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal. (3) Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount. If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997. (a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and (b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and: (i) the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, the R&D entity is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—a clawback amount under section 355‑447 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑466 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. (b) section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions. > Note 2: The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and: (i) the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset; (ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, an R&D entity (the partner) that is a partner in the R&D partnership and is entitled to one or more new law deductions for one or more income years for the asset, is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—a clawback amount under section 355‑449 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑468 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s new law deductions mentioned in paragraph (2)(b) of this section. (4) Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event. > Note: Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions. (1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant. (b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and (3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it. (a) there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and (b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act. (2) The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor. (3) The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and <table cellspacing="0" cellpadding="0" style="width:364.2pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:353.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading" style="page-break-inside:avoid"><span>Conditions for small business taxpayers retaining accelerated rates</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Condition</span></p></td></tr></thead><tbody><tr><td style="width:21.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:321.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>The transferee must have been a small business taxpayer for the income year (the </span><span style="font-weight:bold; font-style:italic">start year</span><span>) that includes the time when the entity first used the plant, or first had it installed ready for use.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>2</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>At that time, neither of these applies:</span></p><p class="Tablea"><span>(a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;</span></p><p class="Tablea"><span>(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection</span><span> </span><span>(5).</span></p></td></tr></tbody></table> ``` (4) For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership. (5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement. (a) for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or (i) replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and (ii) increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).  (b) if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11). (c) that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and (d) that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and (e) that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity. (a) for taxable supplies (if any) the entity makes during the year in the course of carrying on a business—the value (as defined by section 9‑75 of the GST Act) of the supplies; and (b) for other supplies the entity makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies. (1) The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for: (a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (c) for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or (d) for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant. (3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115. (4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain. (5) Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee. (i) the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or (a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and (1) A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act. (2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year. For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if: Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act. (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset): and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply. (i) for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or (ii) for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and (c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act. (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and (2) Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act. The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under: (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on: (2) You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act. (3) A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under: (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and (2) Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act. A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act. The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001. If: (d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act; (a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and (a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and (b) the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and (c) paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997. Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years. (1) For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section. (b) the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (b) that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (1) There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea" style="page-break-after:avoid"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a); and</span></p><p class="Tablea" style="page-break-after:avoid"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (b) disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (f) an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division. (4) If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45‑5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest. (5) If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45‑10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest. Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Disregard the use of the following amounts in determining (for the purposes of Subdivision 50‑A of the Income Tax Assessment Act 1997 whether a fund established before 1 July 1997 operates and pursues its purposes in Australia: Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years. (2) However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date. Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if: (b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time. Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years. 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years (1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act. <table cellspacing="0" cellpadding="0" style="margin-left:56.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:258.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Application provisions for specific sections</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-size:9pt; font-weight:bold">Item</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">This section of the </span><span style="font-size:9pt; font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-size:9pt; font-weight:bold"> ...</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">Applies as described in this provision of this Act ...</span></p></td></tr></thead><tbody><tr><td style="width:24.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55(1)</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>95</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>8</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td></tr></tbody></table> ``` (a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and (b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997. > Note: Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year. (b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997; sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997). > Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock. (3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997. (a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and (b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936; > Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal. #### 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997. (1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year. (2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936. (3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year: (a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners; (b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed. > Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year. > Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year. (b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year; the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year. (2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. (3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2). #### 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997. #### 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business (1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. (2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity. > Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997. (1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. (2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value. > Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997. #### 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year. (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. > Note: Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. > Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given). (5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act). (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment. > Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%. (5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%. (6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.  > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section. (b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4). Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age. Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later. Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies. Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3. (4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997. (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%. > Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986. (5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D. > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. (a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and (b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year). (3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and (2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual: (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income. > Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F. > Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997. > Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997. #### 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 (1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012. (2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies. (3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act. (b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009. (2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if: (i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest; (iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or (i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest; (iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009. (2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time. (4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2): (a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and (b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being: (ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and (c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and (d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if: (i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or (ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and (e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and (i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and (ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and (g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest. (a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced: (i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or (ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and (b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5. (2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right. (3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right. (2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. (3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section. Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years. (1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision. > Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision). > Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936). > Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997. (a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936. (1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936. (2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997. > Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997. (3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and (d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; (f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time. > Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and (d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015. (a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or (4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if: (b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset. The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year. (a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and (1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied: (b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and (d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works). (3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936. Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936. (b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006. (2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement. > Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement. Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual: (b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her. 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act (1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee). (2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year: (3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection. #### 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997. Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936). (2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if: (a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; (a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011); (b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986. > Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section. If: (a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and (b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936; Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995. (1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997. (2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997. (3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997. (4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997. > Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one. Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year: (a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and (b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year; the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation. Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset. (b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section); > Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply. (1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if: (a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and (2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value. (4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value. (a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997. (2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less. (1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936: (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. (1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if: (2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by: (a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or (a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or (2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period. Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year: If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997. (1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002. (2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset. (3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required. (i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and (ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and (c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and (f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997). (a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or (1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:  > total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part. (a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or (2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section. (3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1). (1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences. > Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997. (c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets). (4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act. (5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act. Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement. (a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and (2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time. (a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and (ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs. (2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer. (a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and (b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest; (2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event. (3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly. (4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly. <table cellspacing="0" cellpadding="0" style="width:362.55pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:351.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Creating a CGT asset</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">CGT event number</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Applicable amount</span></p></td></tr></thead><tbody><tr><td style="width:50.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D1</span></p></td><td style="width:290.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the incidental costs the originating company incurred that relate to the CGT event</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D2</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the option</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D3</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the right</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>F1</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred on the grant, renewal or extension of the lease</span></p></td></tr></tbody></table> ``` (5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day. A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision. (a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996. (b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. (b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend. (3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities. (1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company. (2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred. (3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company. (1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of: (2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of: (3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note. (1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised. (b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and (ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act. You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and (b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996. (c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and (c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over. (3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. (a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and (c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and (d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act. (3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division. Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years. A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: (1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day. (2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice. (a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and (b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and (a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and (b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and (c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group. (5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004. (6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection. (1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss): (b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions); and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time: (i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or (e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and (f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and (ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred; (2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if: (a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these: (i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset; (ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and (3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act. (a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and (b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section. (5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of: (a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and (b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset. Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. (ii) that could have been deducted, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the deduction had not been limited by the company’s income for that income year; and (ii) that could have been applied, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the application of the loss had not been limited by the company’s capital gains for that income year. 170‑C Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred #### 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years. #### 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). #### Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997. Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997. If: (a) all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (d) that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and (e) the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place. Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years. > introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament. Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day. #### Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting #### 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B. (1) The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day. (2) No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted. #### 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting (1) Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if: (a) the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and (b) none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount. (2) No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount. (1) This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account. (2) For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. > Note 2: If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60. (3) For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)). (4) For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. (5) The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if: (a) during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and (b) the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section. (a) the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and (b) during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components. (7) For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. (8) Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it: (b) the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component. (9) Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component. (10) For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002: (b) lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination; (c) a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination); (e) the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination); (f) the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination). Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period: 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows: (a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and (i) in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and (ii) in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. > Note: A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002. #### 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002: (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:23.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:87.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A franking surplus</span></p></td><td style="width:220.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.009.png" width="175" height="58" alt="Start formula Amount of the class A franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.010.png" width="190" height="56" alt="Start formula Amount of the class B franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.011.png" width="190" height="56" alt="Start formula Amount of the class C franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` #### 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus): (a) a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Original surplus</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:85.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>class A</span></p></td><td style="width:220.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.012.png" width="169" height="38" alt="Start formula Amount of the original class A surplus times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.013.png" width="169" height="38" alt="Start formula Amount of the original class B surplus times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.014.png" width="169" height="38" alt="Start formula Amount of the original class C surplus times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (4) If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit): (a) a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company. (5) The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking deficit into 1997 Act franking debit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Original deficit</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking debit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(4)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:70.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A</span></p></td><td style="width:235.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.015.png" width="164" height="38" alt="Start formula Amount of the original class A deficit times start fraction 39 over 61 end fraction end formula "></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.016.png" width="164" height="38" alt="Start formula Amount of the original class B deficit times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.017.png" width="164" height="38" alt="Start formula Amount of the original class C deficit times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (2) A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if: (c) the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions. (3) The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if: (b) the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and (1) While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit. (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year. (3) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: > Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act. (1) The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account. (a) a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time; (3) If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if: (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity. #### 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If: the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time. (1) Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections. (2) If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year. Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year. Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year. (5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in: that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement. (6) The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (7) The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (2) The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (3) The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (i) are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and (a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and (b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section. (a) whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and (1) This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002. (a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and (3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded. (1) This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002; (2) If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (3) If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (4) If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. (5) If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows: (a) any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and (i) in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and (ii) in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. #### 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF.  #### 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act). (2) If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus): (a) a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF. (4) If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit): (a) a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF. This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period). (1) The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period: (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (1) The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period. (2) The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner. (3) The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5. (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and (d) the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner; the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received. (3) A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time: (1) A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends. (2) However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period. (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (a) the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed: (d) the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and (e) the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return. (2) The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day. (1) The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period. (2) The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made. Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period. (b) on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax); the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed: (c) the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and (d) the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return. (2) The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day. The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period: If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day. If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and If: (a) a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and (b) the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment; In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment. If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment. The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with. If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953. (1) Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period. (a) the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and (b) the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3); the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on: (c) if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or If: Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax. Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division. If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997. (a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day: (3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002. (a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002: > Note: As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date. (b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997. In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003. (1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year. (a) a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of: (i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time; (iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period; (2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if: (b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time: (ii) the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. > Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. > Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. (7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table: <table cellspacing="0" cellpadding="0" style="width:365.35pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount of the franking credit and the exempting debit</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">If:</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the credit and debit is:</span></p></td></tr></thead><tbody><tr><td style="width:22.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The period starts immediately after 7.30</span><span> </span><span>pm by legal time in the Australian Capital Territory on 13</span><span> </span><span>May 1997</span></p></td><td style="width:141.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Both these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was not in surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>All these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was in surplus at the start of the period;</span></p><p class="Tablea"><span>(c) the surplus in the account at the switch time is greater than the surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the franking surplus in the Australian company’s franking account at the switch time; and</span></p><p class="Tablea"><span>(b) the franking surplus in the Australian company’s franking account at the start of the period</span></p></td></tr></tbody></table> ``` (a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and (b) the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period. Subdivision 235‑I of the Income Tax Assessment Act 1997 applies to assets acquired by the trustee of an instalment trust in: (1) Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years. (2) However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time). (3) The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997. Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997. (2) Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in: (1) Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that: (b) is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose. (a) if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007. > Note: To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997. (b) contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option; the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option. (3) For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5). (4) If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is: (a) the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less (b) the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest. (5) If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is: (6) If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil. (1) If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one. (2) If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year. (3) If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year. (a) for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and (b) for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year: Step 1. Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. Step 2. Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3). Step 3. If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year. > Note: Example: Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75): (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred: (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times: (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate. Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008. (a) the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and (b) the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities: (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (i) the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or (ii) the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and (f) none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made: (i) Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event; (ii) a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year. (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (b) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (c) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year #### 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year (a) the requirements set out in paragraphs 275‑610(1)(a), (b) and (c) of the Income Tax Assessment Act 1997 are satisfied in respect of an amount of non‑arm’s length income of a managed investment trust in relation to an income year; and (b) the managed investment trust became a party to the scheme mentioned in paragraph 275‑610(1)(a) of that Act before the day on which the Bill that became the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 was introduced into the House of Representatives; and Division 276 of the Income Tax Assessment Act 1997 as inserted in that Act by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (the amending Act) applies as set out in subitem 1(1) of Schedule 8 to the amending Act. (b) if the trustee of the trust has made a choice for the purposes of paragraph 1(1)(b) of Schedule 8 to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016—the first income year starting on or after 1 July 2015; or (c) if the trustee of the trust has made a choice for the purposes of subparagraph 276‑10(1)(e)(i) of the Income Tax Assessment Act 1997 in respect of the 2016‑17 income year—that income year. (c) the trust is an AMIT for an income year (the discovery year) that is the starting income year or a later income year. (1) This section applies if the trust has an under or over of a character in the discovery year relating to the base year. (b) if, at a time, the trust sent its members distribution statements for an income year that is prior to the starting income year—assume that the trust sent those members AMMA statements for that income year at that time. (3) For the purposes of Division 276 of the Income Tax Assessment Act 1997, treat the under or over mentioned in subsection (1) as an under or over of the AMIT, in the discovery year relating to the base year, of the character mentioned in that subsection. (a) had the under or over mentioned in subsection (1) been discovered before the starting income year, this Act would have operated to produce a particular effect (the pre‑AMIT scheme effect) for the base year in relation to the amount or amounts reflected in the under or over; and 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT #### 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT (b) working out the amount (if any) of the entity’s capital gain under subsection 104‑70(4) of the Income Tax Assessment Act 1997. (3) For the purpose of working out the amount of the non‑assessable part mentioned in paragraph 104‑70(1)(b), treat the following provisions as being in operation at the time the payment was made: (b) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in paragraph (a). (4) Subsection (3) does not apply to the extent (if any) that the entity, in the income tax return that it lodged for the income year in which the payment was made, included the amount of the payment in its assessable income for that income year. (5) For the purposes of section 118‑20 of the Income Tax Assessment Act 1997, treat this section as being in Part 3‑1 of that Act. (2) The Commissioner cannot amend the entity’s assessment for the income year in which the payment was made in a particular way if: (b) the Commissioner could not amend the assessment in that way if the following provisions were in operation at the time the payment was made: (ii) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in subparagraph (i); and Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82‑10F). (2) The object of this section is to apply (with modifications) provisions limiting deductibility in respect of certain contributions made during the period that: (a) Subdivisions AA and AB of Division 3 of Part III of the Income Tax Assessment Act 1936, as in force just before they were repealed by the Superannuation Legislation Amendment (Simplification) Act 2007; (b) any other provision of the Income Tax Assessment Act 1936, or of any instrument made under that Act, to the extent that it relates to the operation of those Subdivisions; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of those Subdivisions. (b) the deduction limit mentioned in section 82AAC for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (c) the deduction limit mentioned in section 82AAT for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (d) Division 290 of the Income Tax Assessment Act 1997 did not apply to contributions made during the income year mentioned in paragraph (a). (2) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of a defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection and subsection (4), the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 5 September 2006; (b) the defined benefit interest mentioned in paragraph (2)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 5 September 2006, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (2)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (4) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of the defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection, the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 12 May 2009; (b) the defined benefit interest mentioned in paragraph (4)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 12 May 2009, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (4)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (1) The object of this section is to apply (with modifications) provisions relating to excess non‑concessional contributions tax in respect of certain contributions made during the period that: (b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision. (ea) in a case where paragraph 292‑95(1)(b) of that Act would have allowed the contribution mentioned in that paragraph to be made at a time within that period—that paragraph allowed the contribution to be made on or before 30 June 2007; and (f) paragraph 292‑95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and (fa) in a case where subsection 292‑100(2), (4), (7) or (8) of that Act would have allowed the contribution mentioned in that subsection to be made at a time within that period—that subsection allowed the contribution to be made on or before 30 June 2007; and (g) paragraph 292‑100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and (h) contributions made during that period that are covered under section 292‑100 of that Act reduce the person’s CGT cap amount for the 2007‑2008 financial year in accordance with subsection 292‑105(2) of that Act (and despite subsection (1) of that section); and (i) if the conditions in subsection (4) are satisfied—the person’s excess non‑concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and (b) the Commissioner gives the person a transitional release authority under subsection 292‑80A(2) in response to the application; and (c) the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292‑80B within 21 days after the date of the release authority; and (d) the superannuation provider pays the person the amount required under section 292‑80C in relation to the transitional release authority. (b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act). (6) The amount to be included in the first person’s amount of non‑concessional contributions under subparagraph (3)(b)(ii) is the sum of: (a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and (b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made. (c) under Division 295 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)), the contribution is included in the assessable income of the superannuation provider in relation to the superannuation plan to which the contribution is made; and (8) For the purposes of paragraph (7)(b), treat the person as an employee of the other entity if the person would be treated as an employee of the other entity under Division 290 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)). (1) A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007. (2) The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292‑80(3)(b)(i), the person would have excess non‑concessional contributions for the financial year mentioned in paragraph 292‑80(3)(a). (4) For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out: The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 21 days after the date of the release authority. (1) A superannuation provider that has been given a transitional release authority in accordance with section 292‑80B must pay to the person within 30 days after receiving the release authority the least of the following amounts: (a) if the person requests the provider in writing to pay a specified amount in relation to the release authority—that amount; (c) the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person in complying superannuation plans. > Note 1: Section 288‑95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection. > Note 2: Section 288‑100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority. > Note 3: For reporting obligations on the superannuation provider in these circumstances, see section 390‑65 in Schedule 1 to the Taxation Administration Act 1953. (2) The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person in complying superannuation plans. (3) Section 307‑125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section. (a) your non‑concessional contributions cap for the 2015‑2016 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsection 292‑85(7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 applies after the commencement of this section as if: (d) subsection 292‑85(6) of that Act as so amended had been applied (taking into account paragraph (c) of this subsection) for the purposes of working out your non‑concessional contributions cap for the 2016‑2017 financial year. (2) For the purposes of working out your non‑concessional contributions caps for the 2017‑2018 financial year and the 2018‑2019 financial year, if: (a) your non‑concessional contributions cap for the 2016‑2017 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsections 292‑85(6) and (7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 apply after the commencement of this section as if the amount worked out under subsection 292‑85(5) of that Act as so amended were $380,000. (3) To avoid doubt, this section does not affect your non‑concessional contributions cap for any financial year that ended before 1 July 2017. The tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your non‑concessional contributions (see section 292‑90 of the Income Tax Assessment Act 1997) for the financial year. (2) Subject to section 294‑55, the amendments of Division 294 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Treasury Laws Amendment (2017 Measures No. 2) Act 2017 apply on and after 1 July 2017. Despite sections 294‑30 and 294‑140 of the Income Tax Assessment Act 1997 (which are about when you have excess transfer balance), you do not have excess transfer balance in your transfer balance account on any day in the period of 6 months beginning on 1 July 2017 if: (a) the only transfer balance credits in the account in that period arose under item 1 of the table in subsection 294‑25(1) of that Act (which is about superannuation income streams you have just before 1 July 2017); and (b) the sum of those transfer balance credits exceeds your transfer balance cap, but is less than or equal to $1,700,000; and (c) at the end of the period, the sum of all the transfer balance debits arising in your transfer balance account equals or exceeds the amount of the excess from paragraph (b). (1) Despite subsection 294‑10(2), a transfer balance credit arises under item 4 of the table in subsection 294‑25(1) of the Income Tax Assessment Act 1997 only in relation to a borrowing that arises under a contract entered into on or after 1 July 2017. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2017 is treated as if it arose under a contract entered into before 1 July 2017 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) on 1 July 2017, a transfer balance debit arose in your transfer balance account under item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997; and (b) the sum of all the transfer balance credits that arise in your transfer balance account under item 1 of the table in subsection 294‑25(1) of that Act exceeds the amount that would, apart from this section, be the amount of that debit. (2) Despite column 2 of item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997, the amount of the transfer balance debit is instead equal to the sum worked out under paragraph (1)(b) of this section. 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain > The object of this Subdivision is to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the following legislative changes: (a) the introduction of a transfer balance cap (as a result of Schedule 1 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016); (b) the exclusion of transition to retirement income streams (and similar income streams) from being superannuation income streams in the retirement phase (as a result of Schedule 8 to that Act). (a) starting on the start of the day on which the Bill that became the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 was introduced into the House of Representatives; and (a) at the start of the pre‑commencement period, a CGT asset of a fund is a segregated current pension asset of the fund; and (i) at a time (the cessation time) in the pre‑commencement period, the asset ceases to be a segregated current pension asset of the fund; or (ii) at the start of 1 July 2017 (also the cessation time), the asset ceases to be a segregated current pension asset of the fund because it supports a superannuation income stream covered by subsection 307‑80(3) of the Income Tax Assessment Act 1997; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (b) the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year is greater than nil; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and #### 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑115(3)(a), the fund makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the fund’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Subsection 295‑390(1) of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). > 2016‑17 non‑exempt proportion means 1 minus the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year. #### 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset (i) the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997 in respect of the trust for the 2016‑17 income year; (ii) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year; and (d) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and #### 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑125(3)(a), the trust makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the trust’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Section 295‑400 of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). (a) unless paragraph (b) applies—1 minus the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997; or (b) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage worked out by subtracting the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year from 100%. This Subdivision applies to an entity that is the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust. For the purposes of this Subdivision, an asset is a 30 June 1988 asset of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust if the entity owned it at the end of 30 June 1988. > Note: Section 295‑90 of the Income Tax Assessment Act 1997 treats these assets as having been acquired on 30 June 1988. (1) The first element of the cost base of each 30 June 1988 asset of the entity’s is the greater of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). (2) The first element of the reduced cost base of each 30 June 1988 asset of the entity’s is the lesser of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). the market value of the asset as at the end of 30 June 1988 is the average of the highest and lowest trade prices for identical assets recorded on 30 June 1988 in whichever of the following markets is applicable: (d) if, on that date, there was a State capital city market (other than the Sydney market) that recorded a higher volume of trading than the Sydney market in identical assets—that State capital city market; (2) For the purposes of this section, an asset is taken to have been listed on an Australian stock exchange on 30 June 1988 if, and only if, on that day the asset had the status of having been granted official quotation by a securities exchange within the meaning of the former Securities Industry Act 1980 or the law of a State or Territory corresponding to that former Act. (b) at any time during the period commencing at the time when the shares were acquired and ending at the end of 30 June 1988, the company paid an amount that was not a dividend to the entity in respect of the shares; (b) at any time during the period commencing at the time when the interest or unit was acquired and ending at the end of 30 June 1988, the trustee of the trust paid an amount to the entity in respect of the interest or unit, being: (i) in a case where the entity was exempt from tax for the year of income in which the payment was made—an amount that, if the entity had not been exempt from tax, would not have been the entity’s assessable income; or the cost base to the entity of the interest or unit as at 30 June 1988 is reduced by so much of the amount as is not attributable to a deduction allowed under former Division 10C or 10D of the Income Tax Assessment Act 1936. (1) Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (2) and (3) of this section apply if an entity exercises rights or options as mentioned in that section to acquire: (b) the greater of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (b) the lesser of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (4) The payment referred to in subsection (2) or (3) can include giving property. To the extent that the payment does, use the market value of the property in working out the amount of the payment. (1) A notice given under subsection 82AAT(1A) or (1CB) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑170 of the Income Tax Assessment Act 1997. (2) A notice given under subsection 82AAT(1C) or (1CD) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑180 of the Income Tax Assessment Act 1997. (1) A proportion of the ordinary income and statutory income of a continuously complying fixed interest ADF of an income year that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).  > Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the income year. > Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the income year. (4) A choice for the purposes of the definition of reckoning time in subsection (5) must be made on or before the date of lodgment of the income tax return of the ADF for the income year to which the choice relates, or before a later day allowed by the Commissioner. > continuously complying fixed interest ADF, in relation to an income year (the current year), means a fund that is a fixed interest complying ADF in relation to each of the following years: > current 25 May balance, in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time: (b) subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 September 1989 is to be added to the balance; (b) a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that day, made a deposit with the ADF that consisted wholly or partly of the roll‑over (as defined in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 as in force on that day) of an eligible termination payment as so defined, being an eligible termination payment that included a concessional component (as so defined). > fixed interest complying ADF, in relation to a year of income, means a complying ADF where both of the following conditions are satisfied: (a) not less than 90% of the amount that, apart from this section, would be the assessable income of the ADF of the income year (other than non‑arm’s length income or amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997) consists of any one or more of the following: (ii) any profit arising on the disposal, redemption, cancellation or maturity of a CGT asset referred to in paragraph 295‑85(3)(b) of the Income Tax Assessment Act 1997; (iii) an amount included in assessable income under Division 16E of Part III of the Income Tax Assessment Act 1936 (or would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply); (ii) virtual PST life insurance policies (as defined in the Income Tax Assessment Act 1997) issued by a life insurance company. > original 25 May balance, in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988. > reckoning time, in relation to an ADF in relation to an income year, means the beginning of the income year, or such other time during the income year as the ADF chooses in accordance with subsection (4). (6) This section does not apply to an ADF in relation to an income year unless the whole of the benefit that would accrue to the ADF from the application of this section in relation to the income year has been, or can reasonably expected to be, passed on to eligible depositors. An election made by the trustee of a complying superannuation fund under subsection 279(4) of the Income Tax Assessment Act 1936 that had effect for the income year of the fund in which 30 June 2007 occurs continues to have effect as if it had been made under section 295‑465 of the Income Tax Assessment Act 1997. Subdivisions 295‑I (no‑TFN contributions) and 295‑J (Tax offset for no‑TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006‑2007 income year ends on a day (the end day) after 1 July 2007 as if: (b) the entity’s no‑TFN contributions income for the entity’s 2007‑2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007‑2008 income year if the contributions concerned had been made in the entity’s 2007‑2008 income year. (2) Division 301 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section because you are a member of the fund in the same way as it would apply if the payments were superannuation member benefits paid to you from a complying superannuation fund. For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. Subdivision 301‑F of the Income Tax Assessment Act 1997 applies in relation to income years starting on or after 1 July 2007. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to the following in respect of an income year that starts on or before 1 July 2021: (b) the amendments of the Income Tax Assessment (1997 Act) Regulations 2021 made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023. (a) a superannuation benefit (the trigger benefit) was paid to a person in the 2020‑21 income year or an earlier income year; and (c) the trigger benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; and (2) The Commissioner cannot amend an assessment on the basis that a superannuation benefit paid to the person is a superannuation income stream benefit because of the amendments made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 if: (iii) the superannuation benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (a) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (b) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. (1) The Minister may, by legislative instrument, make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions) that: (a) relate to the amendments or repeals made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023; and (2) Without limiting subsection (1), rules made under this section before the end of the period of 12 months starting on the day that Schedule commences may provide that provisions of that Schedule, or any other Act or instrument, have effect with any modifications prescribed by the rules. Those provisions then have effect as if they were so modified. (2) Division 302 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section after another person’s death, because the other person was a member of that fund, in the same way as it would apply if the payments were superannuation death benefits paid to you from a complying superannuation fund. For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if: (b) just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. (2) For the purposes of Subdivision 82‑B of Division 82, Division 302 and section 303‑5 of the Income Tax Assessment Act 1997, the definition of death benefits dependant in section 302‑195 of that Act applies as if paragraphs (a) and (b) of the definition were replaced with the following paragraphs: (a) a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008 or a person who was formerly such a spouse; or (b) a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008, who is aged less than 18. (ii) a superannuation guarantee payment, a small superannuation account payment, an unclaimed money payment, a superannuation co‑contribution benefit payment or a superannuation annuity payment. (2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you at a time in the period: (i) a condition of release specified in item 107A or 207AA of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; or (ii) a condition of release specified in item 109AA of the table in Schedule 2 to the Retirement Savings Accounts Regulations 1997. (1) This section applies to a superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with section 292‑80B. (2) The superannuation benefit is not assessable income and is not exempt income to the extent that it does not exceed the amount mentioned in subsection (3). (3) The amount is the amount of excess non‑concessional contributions stated in the release authority in accordance with paragraph 292‑80A(3)(a), reduced (but not below zero) by the amount of any superannuation benefit that was not assessable income and not exempt income under a previous operation of subsection (2) in relation to the release authority. (4) The superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3). (a) you have an interest in a FIF (within the meaning of Part XI of the Income Tax Assessment Act 1936, as in force just before the commencement of item 37 of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010) (the paying fund); and (b) Subdivision 305‑B of the Income Tax Assessment Act 1997 applies in relation to the paying fund (see section 305‑55 of that Act); and (c) the paying fund transfers an amount to a complying superannuation fund in respect of you during the deduction year; and (d) you choose under section 305‑80 of the Income Tax Assessment Act 1997 that the amount, or part of the amount, is to be treated as assessable income of the complying superannuation fund; and (e) immediately before the transfer happens, there is a post‑FIF abolition surplus (within the meaning of the Income Tax Assessment Act 1936) for the paying fund in relation to you; and For the purposes of the definition of specified roll‑over amount in the Income Tax Assessment Act 1997, treat the taxable component of a directed termination payment (within the meaning of section 82‑10F) as the element untaxed in the fund of a superannuation benefit that is a roll‑over superannuation benefit. (1) This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007. > Note: This section also applies to an income stream replacing an earlier one because of an involuntary roll‑over (see section 307‑127). (2) Despite subsection 307‑125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows: (a) first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007); (b) next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits. The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit. (3) Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened: (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day; (ba) the holder of the superannuation interest is aged 60 or above on 1 July 2007, if none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day. (a) treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and (b) work out the tax free component of the superannuation interest for the purposes of section 307‑125 of the Income Tax Assessment Act 1997 under subsections (6) and (6A). (i) an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and (ii) the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time; (b) next, work out the unused undeducted purchase price (within the meaning of paragraph (a) of the definition of that term in subsection 27A(1) of the Income Tax Assessment Act 1936 just before the commencement of this section, and disregarding paragraphs (b) and (c) of that definition) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007; (c) next, work out the pre‑July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this section) of the eligible termination payment. (a) at least one superannuation income stream benefit was paid from the superannuation income stream before 1 July 1994; or (b) section 27AAAA of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007) applied to the superannuation income stream just before 1 July 2007; (7) For the purposes of paragraph (6)(c), disregard the value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment. (8) If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as: (b) if 1 or more other events mentioned in subsection (3) happened before the commutation—the time just before the earliest of those events happens. (a) references in that section to the later income stream (in relation to a time, or event happening, before the payment of that involuntary roll‑over superannuation benefit) include references to the earlier income stream; and (b) references in that section to the superannuation interest supporting the later income stream (in relation to a time, or event happening, before the payment of that benefit) include references to the earlier interest. (1) This section applies for the purposes of working out the amount of your total superannuation balance just before 1 July 2017. (2) The transfer balance mentioned in paragraph 307‑230(1)(b) of the Income Tax Assessment Act 1997 just before 1 July 2017 is taken to be equal to: (a) the sum of the transfer balance credits (if any) in your transfer balance account just after the start of 1 July 2017; less (b) the sum of the transfer balance debits (if any) arising in your transfer balance account on 1 July 2017 under item 4 of the table in subsection 294‑80(1) of that Act (about payment splits). (1) Section 307‑231 of the Income Tax Assessment Act 1997 applies in relation to borrowings that arise under contracts entered into on or after 1 July 2018. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2018 is treated as if it arose under a contract entered into before 1 July 2018 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) treat a deduction made under former section 279 of the Income Tax Assessment Act 1936 as having been made under section 295‑465 of the Income Tax Assessment Act 1997 instead; and (b) treat a deduction made under former section 279B of the Income Tax Assessment Act 1936 as having been made under section 295‑470 of the Income Tax Assessment Act 1997 instead. If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007‑2008 income year is, despite subsection 307‑345(1), the total of: (b) the amount by which $140,000 exceeds the upper limit for the 2006‑2007 income year (worked out under section 159SG of that Act). Division 316 of the Income Tax Assessment Act 1997 applies in relation to demutualisations occurring on or after 1 July 2008. If: (a) any assets held by the benefit funds of a life insurance company that is a friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a complying superannuation fund; and (b) the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer; the transfer is disregarded for any purposes of the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936. (1) In working out the amount that a life insurance company can deduct, in respect of life insurance policies that are disability policies (other than continuous disability policies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income. (2) In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection (1) applies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company’s liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320‑85(4) of that Act. If: (2) If the life insurance company wishes to include a part of an approved asset in its virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑87(2) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society establishes a virtual PST in the 2000‑01 income year, the calculation of the transfer values of the company’s virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year. (1) Subsection (3) applies for the purposes of subparagraph (b)(i) of the definition of virtual PST life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 259 of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007. (2) Subsection (3) also applies for the purposes of subparagraph (b)(i) of the definition of complying superannuation/FHSA life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 47 of Schedule 7 to the First Home Saver Accounts (Consequential Amendments) Act 2008. (3) Treat an annuity as having been purchased out of a superannuation lump sum or an employment termination payment, if the annuity was purchased: (b) out of an eligible termination payment (within the meaning of the Income Tax Assessment Act 1997, as in force just before the commencement mentioned in subsection (1) of this section). (2) If the life insurance company wishes to include a part of an approved asset in its segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (a) a life insurance company had a liability before 1 July 2000 under a life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and (c) there is a transfer of the company’s assets to the segregated exempt assets to meet that liability or that part of the liability; (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑105(1) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320‑225 of the Income Tax Assessment Act 1997 in the 2000‑01 income year, the calculation of the transfer values of the company’s segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year. Section 322‑25 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Part VC of the Insurance Act 1973 after 17 October 2008. 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you > new Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force after the commencement of this section. > old Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. > STS taxpayer means an STS taxpayer within the meaning of Division 328 of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. #### 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years (1) This section applies for the purpose of working out whether you are a small business entity (other than because of subsection 328‑110(4) of the Income Tax Assessment Act 1997) for the 2007‑08 or 2008‑09 income year. (2) You work out your aggregated turnover for the 2005‑06 or 2006‑07 income year as if the amendments made by Schedule 1 to the Tax Laws Amendment (Small Business) Act 2007 had been in force in relation to that year. (a) your aggregated turnover for the 2005‑06 income year (worked out in accordance with subsection (2)) is $2 million or more; but (b) your STS group turnover for that year (worked out under Subdivision 328‑F of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section) is less than $2 million. (2) The following provisions apply as if you are a small business entity for the income year in which you are winding up the business: #### 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you (1) For the purpose of working out whether you are a small business entity for the 2007‑08, 2008‑09, 2009‑10 or 2010‑11 income year (each a relevant income year) for the purposes of a provision to which subsection (3) applies: (2) An entity (the first entity) controls a discretionary trust for a relevant income year if, for any of the 4 income years (a previous income year) before that year: (a) if the previous income year is before the 2007‑08 income year—the trustee of the trust made a distribution of $100,000 or more to the first entity, any of its affiliates, or the first entity and any of its affiliates; or (i) the trustee of the trust paid to, or applied for the benefit of, the first entity, any of the first entity’s affiliates, or the first entity and any of its affiliates, any of the income or capital of the trust; and (ii) the percentage (the control percentage) of the income or capital paid or applied is at least 40% of the total amount of income or capital paid or applied by the trustee for that year. (1) This section sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (2) This section also sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (3) Any ordinary income that, apart from paragraph 328‑105(1)(a) of the Income Tax Assessment Act 1997 (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have derived before the changeover year (while you were using the STS accounting method) and you have not included in your assessable income because you have not received it is included in your assessable income for the changeover year. (4) Any general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, that, apart from paragraph 328‑105(1)(b) of that Act (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have incurred before the changeover year (while you were using the STS accounting method) and that you have not deducted because you have not paid them can be deducted for the changeover year. (b) for any later income year for which you are a small business entity but only if you used the STS accounting method for the income year before that later year. > Note: Example: You are a small business entity for the 2007‑08 and 2008‑09 income years and you continue to use the STS accounting method for those years. You are not a small business entity for the 2009‑10 income year so you cannot continue to use the STS accounting method for that year. Because you cannot use the STS accounting method for the 2009‑10 income year, you will not be able to use it again for a later income year even if you are a small business entity for that later year. In sections 328‑115 and 328‑120, STS accounting method means the accounting method that was required by the Income Tax Assessment Act 1997 to be used by STS taxpayers for the 2004‑05 income year. (b) you made a choice under subsection 328‑175(3) of old Subdivision 328‑D in relation to a depreciating asset you use to carry on a primary production business and for which you could deduct amounts under Subdivision 40‑F or 40‑G of the Income Tax Assessment Act 1997. (2) In determining whether you can choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997 in an increased access year, disregard subsection 328‑175(10) of that Act. (3) In applying paragraph 328‑175(10)(b) of that Act for the purpose of determining whether you can choose to use that Subdivision in any income year after the increased access years, disregard: (4) Paragraph 328‑180(1)(b) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that paragraph to $1,000: (i) first used the asset, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (i) first used the asset, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (i) first used the asset, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, on or after 1 July 2023 and on or before 30 June 2026. (a) a reference in that paragraph to the end of the income year in which you start to use the asset, or have it installed ready for use, for a taxable purpose were a reference to the earlier of: if: (i) first used the asset, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021. (5) Paragraph 328‑180(2)(a) or (3)(a) of the Income Tax Assessment Act 1997 applies to an amount included in the second element of the cost of an asset as if a reference in that paragraph to $1,000: (5A) For the purposes of determining whether, under subsection 328‑180(2) of the Income Tax Assessment Act 1997, you can deduct, for an income year (the current year), the taxable purpose proportion of an amount included in the second element of the cost of an asset, disregard paragraph (b) of that subsection if: (2) For the purposes of determining whether subsection 328‑180(1) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (b) of that subsection (which sets a limit of $1,000 on the cost of the asset) if, in the period beginning at the 2020 budget time and ending on 30 June 2023, you: (3) For the purposes of determining whether subsection 328‑180(2) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (a) of that subsection (which sets a limit of $1,000 on the amount) if the amount is included in the second element of the cost of the asset at any time in the period beginning at the 2020 budget time and ending on 30 June 2023. (4) In applying paragraph 328‑180(3)(a) of the Income Tax Assessment Act 1997 to an asset, disregard an amount included in the second element of the cost of the asset if the amount is deducted under subsection 328‑180(2) of that Act, as modified by subsection (3) of this section. (5) Section 328‑210 of the Income Tax Assessment Act 1997 applies as if the words “less than $1,000 but” in subsection (1) were disregarded, in relation to a deduction for an income year that ends: Subsection 328‑190(2) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that subsection to 15% were a reference to 57.5% if you are covered by section 40‑125 for the asset (which is about backing business investment). (1) A depreciating asset of yours that had been allocated to your general STS pool is treated as being allocated to your general small business pool. (2) A depreciating asset of yours that had been allocated to your long life STS pool is treated as being allocated to your long life small business pool. (3) If you made a choice, under subsection 328‑185(5) of old Subdivision 328‑D, not to have a depreciating asset allocated to your long life STS pool, the choice has effect for the purposes of subsection 328‑185(5) of new Subdivision 328‑D. (1) This section applies if a depreciating asset of yours is treated as being allocated to your general small business pool or long life small business pool under section 328‑185. (2) The opening pool balance of your general small business pool or long life small business pool for the 2007‑08 income year is taken to be the closing pool balance of your general STS pool or long life STS pool, as the case requires, for the 2006‑07 income year, reduced or increased by any adjustment required under section 328‑225 of new Subdivision 328‑D (about change in the business use of an asset). (a) you were not an STS taxpayer for the 2006‑07 income year (because you stopped being an STS taxpayer before that time); but (b) you are a small business entity for the 2007‑08 income year or a later income year and you choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets for that income year; the opening pool balance of your general small business pool or long life small business pool includes the sum of the taxable purpose proportions of the adjustable values of depreciating assets allocated to the pool under subsection 328‑185(3) of new Subdivision 328‑D for that year. (1) This section applies for the purposes of applying Subdivision 328‑D of the Income Tax Assessment Act 1997 for the 2012‑13 income year and later income years. (2) A depreciating asset that had been allocated to your long life small business pool is treated as being allocated to your general small business pool. (a) the closing pool balance of your general small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under section 328‑225 of that Act; and (b) the closing pool balance of your long life small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under that section. (1) This section applies if you chose to stop being an STS taxpayer for the 2005‑06 income year or the 2006‑07 income year. (2) You cannot choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets until at least 5 years after the income year for which you chose to stop being an STS taxpayer. > Note: Subdivision 328‑D of the Income Tax Assessment Act 1997 continues to apply to depreciating assets that have been allocated to your small business pools even if you are not a small business entity, or do not choose to use that Subdivision, for an income year: see section 328‑220 of that Subdivision. (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct 20% of particular expenditure for your 2023‑24 income year if: (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (d) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑450 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (6) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (ii) if the provider is a registered body of a kind listed in paragraph (2)(b), (c) or (d)—the training is within the provider’s scope of registration for that kind of registered body; and (d) each enrolment, or arrangement, for the provision of the training is made or entered into at or after 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022; and > Note: Paragraphs (b) and (c) mean this section will not apply to expenditure for on‑the‑job training or training provided by you in house. (a) a registered higher education provider (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); (b) a NVR registered training organisation (within the meaning of the National Vocational Education and Training Regulator Act 2011); (c) a registered education and training organisation (within the meaning of the Education and Training Reform Act 2006 (Vic.)); (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct for your 2023‑24 income year an amount that is equal to the sum of: (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (3) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑460 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (4) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (b) you incur the expenditure in the period starting at 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022 and ending at the end of: (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (4) For the purposes of paragraphs (1)(c) and (2)(c), in working out whether you can deduct an amount of expenditure on a depreciating asset, assume that: (b) throughout that effective life, you will use the asset for a taxable purpose to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose. (a) 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑470(1) or (3) applies in relation to the income year; and > Note: The deduction relates to the period of 1 July 2023 to 30 June 2024. An entity may have deducted an amount under paragraph (a) for a previous income year if the entity has a substituted accounting period. (2) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑470 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (3) Sections 8‑10, 40‑215 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (c) you start to use the asset, or have it installed ready for use, for any purpose after 30 June 2023 but before 1 July 2024; and (d) you start to use the asset, or have it installed ready for use, for a taxable purpose at a time (the start time) that is: (e) you are a small business entity, or an entity covered by subsection (4), for the income year that includes the start time; and (h) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) a new reasonably comparable depreciating asset that uses a fossil fuel (other than a use of which that is merely incidental) is available in the market at the start time; (ii) if the asset is being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than the other asset; (iii) if the asset is not being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than a new reasonably comparable depreciating asset that is available in the market at the start time; or (i) a depreciating asset (other than an asset excluded under subsection (6)) that uses electricity, or energy that is generated from a renewable source, to be more energy efficient; (iv) the use of electricity, or energy that is generated from a renewable source, by another depreciating asset to be monitored. (a) the amount is included in the second element of a depreciating asset’s cost under paragraph 40‑190(2)(a) of the Income Tax Assessment Act 1997; and (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (d) you are a small business entity, or an entity covered by subsection (4), for the income year in which the expenditure is incurred; and (i) if the asset could use a fossil fuel (other than a use of which that is merely incidental)—the asset to only use electricity, or energy that is generated from a renewable source; (ii) if the asset uses electricity, or energy that is generated from a renewable source—the asset to be more energy efficient; (g) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) For the purposes of paragraph (1)(b) or (3)(b), in working out whether you can deduct an amount of expenditure assume that: (i) for the purposes of paragraph (1)(b)—to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose; or (ii) for the purposes of paragraph (3)(b)—to the same extent as you use it for a taxable purpose in the income year in which the expenditure is incurred. (b) expenditure (other than expenditure referred to in subparagraph (3)(e)(i)) on an asset that can use a fossil fuel (other than a use of which that is merely incidental); (c) an asset that solely or predominantly generates electricity from a renewable source (for example, photovoltaic cells) or expenditure on such an asset; (d) an asset, or expenditure, being capital works for which you can deduct an amount under Division 43 of the Income Tax Assessment Act 1997; > Note: Subsections (1) and (3) also do not apply to an item of trading stock because such an asset is not a depreciating asset: see section 40‑30 of the Income Tax Assessment Act 1997. A reference in each of the following provisions of the Income Tax Assessment Act 1997 to a registration under section 27A of the Industry Research and Development Act 1986 includes a reference to a registration under former section 39J of that Act: (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) the R&D entity cannot deduct an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from: (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D entity could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:22pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the R&D entity is taken to be able to deduct under subsection 355‑315(2) of the new Act that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the R&D entity’s assessable income for the event year under subsection 355‑315(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 for the asset, the R&D entity is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑446 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the R&D entity is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑465 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: Section 355‑315 of the new Act would otherwise apply for the event in a case where the R&D entity had new law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by an R&D partnership; and (i) the partner can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the partner chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D partnership could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the partner is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:21.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D entity</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D partnership</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the partner is taken to be able to deduct under subsection 355‑525(2) of the new Act the partner’s proportion of that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the partner’s assessable income for the event year under subsection 355‑525(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partner’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if one or more partners (including the partner) in the R&D partnership is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset, the partner is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑448 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the partner is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑467 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s deductions under section 355‑520 of the new Act mentioned in subsection (4A) of this section. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the partner for the event, do so apply to the partner for the event. > Note 1: Section 355‑525 of the new Act would otherwise apply for the event in a case where the partner had new law deductions. Item 7 of the table in subsection 57‑110(2) in Schedule 2D to the Income Tax Assessment Act 1936 applies as if the deduction rules set out in the final column of that item also included former sections 73BA and 73BH of the Income Tax Assessment Act 1936. For the purposes of step 1 of the method statement in subsection 355‑415(2) of the Income Tax Assessment Act 1997, also disregard amounts that have already been taken into account under former subsection 73B(14AA) of the Income Tax Assessment Act 1936 for the R&D entity, the grouped entity and the R&D activities for an earlier income year. (1) This section applies if, apart from former paragraph 73B(10)(a) of the Income Tax Assessment Act 1936, an eligible company could deduct advance R and D expenditure in one or more income years commencing on or after 1 July 2011. > Note: That deduction would be under former section 73B of that Act as that former section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (a) apart from Subdivision H (prepaid expenditure) of Division 3 of Part III of the Income Tax Assessment Act 1936, an eligible company can deduct an amount under former section 73B, 73BA, 73BH, 73QA, 73QB or 73Y of that Act for an income year commencing before 1 July 2011; and (c) apart from former paragraph 73B(10)(a) of that Act, the eligible company could deduct an amount, as a result of that application of that Subdivision, for an income year commencing on or after 1 July 2011. > Note: That deduction would be under that Act as it applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (3) Former paragraph 73B(10)(a) of that Act is taken to apply to those income years commencing on or after 1 July 2011 as if the reference in that former paragraph to section 39J of the Industry Research and Development Act 1986 were a reference to section 27A of that Act. (4) An expression used in this section that is also used in former section 73B of the Income Tax Assessment Act 1936 has the same meaning in this section as it has in that former section. This Subdivision applies to core technology (within the meaning of former section 73B of the Income Tax Assessment Act 1936) if: (a) you incurred core technology expenditure (within the meaning of that former section) in an income year commencing before 1 July 2011 in relation to the core technology under one or more contracts entered into at or after the time referred to in former subsection 73B(12) of that Act; and (b) that expenditure (the undeducted expenditure) cannot be deducted for the last income year commencing before 1 July 2011. (1) This section applies for the purposes of Division 40 of the Income Tax Assessment Act 1997, other than sections 40‑292 and 40‑293 of that Act, if the core technology (the asset) is a depreciating asset. (2) Disregard this section, including its effect on the amount you can deduct under section 40‑25 of that Act for the asset, for the purposes of working out: (3) The asset’s opening adjustable value for the first income year that commences on or after 1 July 2011 (the first new income year) is equal to the amount of the undeducted expenditure. (4) Subsection 40‑75(2) of the Income Tax Assessment Act 1997 applies to the asset as if the first new income year were a change year (within the meaning of that subsection). If the core technology is not a depreciating asset, you can deduct the undeducted expenditure in equal proportions over a period of 5 income years starting in the first income year commencing on or after 1 July 2011. To work out the film component (if any) of your tax loss for the 1997‑98 income year or a later income year, apply former section 375‑805 of the Income Tax Assessment Act 1997. If you incurred a film loss for the purposes of former section 79F (Film losses of 1989‑90 to 1996‑97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989‑90 to 1996‑97 income years, that film loss is the film component of your tax loss for that income year. (1) To work out your film loss (if any) for the purposes of the Income Tax Assessment Act 1997 for the 1989‑90 or a later income year, apply former section 375‑810 of that Act. (2) You can deduct in the 1997‑98 or a later income year your film loss for any of the 1989‑90 to 1996‑97 income years only to the extent that it has not already been deducted. (1) Division 392 of the Income Tax Assessment Act 1997 applies to assessments for the 1998‑99 income year and later income years. (a) it had applied to your assessment for each income year before the 1998‑99 income year for which Division 16 of Part III of the Income Tax Assessment Act 1936 applied in relation to your income; and (b) you had carried on a primary production business during each income year before the 1998‑99 income year when you carried on a business of primary production; and (c) for each income year before the 1998‑99 income year you had a basic taxable income equal to your taxable income for the income year for the purposes of Division 16 of Part III of the Income Tax Assessment Act 1936. > Note: Section 149A of the Income Tax Assessment Act 1936 identifies what your taxable income for an income year is for the purposes of Division 16 of Part III of that Act. Division 392 of the Income Tax Assessment Act 1997 does not apply to your assessment for the 1998‑99 income year or a later income year if you made an election under section 158A (Election that Division not apply) of the Income Tax Assessment Act 1936 relating to an income year before the 1998‑99 income year. 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 A reference in Division 393 of the Income Tax Assessment Act 1997 to a deduction under section 393‑5 of that Act for making a farm management deposit is taken to include a reference to a deduction under section 393‑10 in Schedule 2G to the Income Tax Assessment Act 1936, as in force just before the commencement of this section, if the deposit was made before the 2010‑11 income year. #### 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 (b) the deposit was made with an FMD provider as a result of a request to which section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, applied; the unrecouped FMD deduction in respect of the deposit at that time is equal to the amount of the unrecouped deduction (within the meaning of the former subsection 159GA(3) of the Income Tax Assessment Act 1936) in respect of the deposit immediately before it ceased to be a deposit under the Loan (Income Equalization Deposits) Act 1976. > Note: This means that the unrecouped deduction relating to the deposit under the Loan (Income Equalization Deposits) Act 1976 continues to apply (by becoming an unrecouped FMD deduction) when the deposit is transferred to an FMD provider as a farm management deposit. The Loan (Income Equalization Deposits) Act 1976 was repealed on 22 February 2005. If a beneficiary of a trust was covered by paragraph (c) of the definition of primary producer in section 393‑25 in Schedule 2G to the Income Tax Assessment Act 1936 in the 2009‑10 income year, treat subsection 393‑25(3) of the Income Tax Assessment Act 1997 as having applied to the beneficiary for the purpose of determining the maximum number of choices that the trustee may make under subsection 393‑27(2) of that Act for the 2010‑11 income year. (a) a farm management deposit of an owner was unclaimed moneys for the purposes of section 69 of the Banking Act 1959; and (2) For the purpose of subsection 393‑10(1) of the Income Tax Assessment Act, treat the repaid unclaimed moneys as a repayment of the deposit of the owner. (3) To avoid doubt, the payment of unclaimed moneys to the Commonwealth under section 69 of the Banking Act 1959 is not a repayment of the deposit of the owner for the purposes of Division 393 of the Income Tax Assessment Act 1997. 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 #### 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 If a farm management deposit was made with an FMD provider as a result of a request under section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, then: (a) subsections 393‑40(1) to (4) of the Income Tax Assessment Act 1997 apply as if the day the deposit was made was the day on which the deposit was originally made under the Loan (Income Equalization Deposits) Act 1976; and (1) A copyright collecting society to which section 51‑43 of the Income Tax Assessment Act 1997 applies, may elect that, from 1 July 2004, the section apply to all ordinary income, and statutory income, collected or derived by the society on or after 1 July 2004. Division 420 of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division. Subdivision 615‑C of the Income Tax Assessment Act 1997 applies to you with the modifications set out in this Subdivision if you chose to obtain a roll‑over involving \*shares or units that: (b) were your trading stock, or revenue assets, at the time immediately before that disposal, redemption or cancellation. (1) Disregard subparagraph 615‑45(a)(ii), and paragraph 615‑45(b), of the Income Tax Assessment Act 1997 if the roll‑over relates to \*shares that were disposed of, redeemed or cancelled. (2) For each of the \*shares in the interposed company that you acquired in return for those of your shares or units in the original entity that were your \*trading stock at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  (2) For the purpose of calculating any profit or loss on a future disposal, cessation of ownership, or other realisation of a \*share in the interposed company that you acquired in return for those of your shares or units in the original entity that were \*revenue assets at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  Subdivision 620‑A of the Income Tax Assessment Act 1997 applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. (1) Part 3‑90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Act (No. 1) 2002 and amended by: (2) Section 713‑50 of the Income Tax Assessment Act 1997 (about factors to consider in determining destination of distribution by non‑fixed trust) applies for the purposes of this Part in the same way as it applies for the purposes of Part 3‑90 of that Act. ### Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly‑owned subsidiary of the entity (the future head company) that became the head company of the group; or (ii) at some time during that period, the entity was a wholly‑owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (ii) it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (1) If a group is a transitional group, its head company may, subject to subsection (3), choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (3) If the choice is to be made after the end of the period mentioned in paragraph (2)(a) and before the end of the day mentioned in paragraph (2)(b), it cannot be made unless each entity in relation to which the conditions in subsection (5) are satisfied has agreed to it being made. (a) the entity (the leaving entity) ceased to be a subsidiary member of the group before the choice was made (in a subsection (3) case) or before the revocation took place (in a subsection (4) case); and (b) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; and (c) the asset had become that of the head company because that section applied when a chosen transitional entity (whether or not the same entity as the leaving entity) became a subsidiary member. Section 716‑855 applies for the purposes of this Division in the same way as that section applies for the purposes of Part 3‑90 of the Income Tax Assessment Act 1997. is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705‑B of that Act and with this Division. 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity Section 701‑10 (cost to head company of assets of joining entity) and subsection 701‑35(4) (setting value of trading stock at tax‑neutral amount) of the Income Tax Assessment Act 1997 do not apply to the assets of a chosen transitional entity. > Note: The fact that the head company inherits the entity’s history under section 701‑5 of that Act when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time. #### 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities (2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non‑chosen subsidiary) is worked out in a special way. (b) for each sub‑group (see subsection (6)) that exists in relation to the non‑chosen subsidiary—the sub‑group’s notional allocable cost amount (see subsection(5)) for the non‑chosen subsidiary. (4) The head company adjusted allocable amount for the non‑chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if; (b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of head company’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub‑group in relation to the non‑chosen subsidiary. (5) For each sub‑group that exists in relation to the non‑chosen subsidiary, there is a sub‑group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non‑chosen subsidiary if: (a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non‑chosen subsidiary and the entities comprising the sub‑group; and (c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub‑group membership interests (see subsection (6)) in relation to the sub‑group, and any such entity held those membership interests during the period when it actually held them; and (d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of chosen transitional entity’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub‑group. (6) If a chosen transitional entity holds membership interests in a non‑chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non‑chosen subsidiary: (a) the chosen transitional entity and each interposed non‑chosen subsidiary comprise a sub‑group in relation to the non‑chosen subsidiary (unless the non‑chosen subsidiary is included in a sub‑group in relation to another non‑chosen subsidiary); and (i) the membership interests that the chosen transitional entity holds directly in the non‑chosen subsidiary or in any of the interposed non‑chosen subsidiaries; (ii) the membership interests that each interposed non‑chosen subsidiary holds directly in the non‑chosen subsidiary or in any of the other interposed non‑chosen subsidiaries. #### 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities If any provision of the Income Tax Assessment Act 1997 would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply. > Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred. (1) This section has effect for the purposes of applying section 705‑70 (step 2 of allocable cost amount) of the Income Tax Assessment Act 1997 in relation to a transitional entity. (2) In spite of subsection 705‑70(1A) of that Act, if the amount of an accounting liability of the transitional entity would be different when it becomes an accounting liability of the transitional group, that difference is not taken into account in working out the amount of the liability. #### 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different (a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset (the roll‑over asset) for which there was: (ii) roll‑over relief under section 40‑340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and (i) became an asset of the head company when the transitional group came into existence because subsection 701‑1(1) (the single entity rule) of that Act applies; or differs at that time from what it would have been if the act, transaction or event that gave rise to the CGT event had not occurred in relation to the roll‑over asset; then the provisions mentioned in subsection (2) apply as if the act, transaction or event had not occurred in relation to the roll‑over asset. (a) the act, transaction or event mentioned in subsection (1) happened before a demerger and in connection with the demerger; and (b) before the transitional group came into existence, at least one of the following entities ceased to be a member of the demerger group because of the demerger: (i) the originating company in relation to the roll‑over, or the transferor in relation to the roll‑over relief, was a foreign resident; and (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as a transitional foreign‑held subsidiary of the group. #### 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets (1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied. (2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset. (a) the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and (b) former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset. (4) The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group. (6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses. #### 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets (b) just before the transitional group came into existence, the entity that became the head company held a pre‑CGT asset; and (d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre‑CGT asset and is held by the head company only because the entity is taken by subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company. (2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence. #### 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity (1) This section provides for an addition to the step 1 amount for working out under section 711‑20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity) that ceases to be a subsidiary member of the transitional group at a time (the leaving time), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701‑1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount for paragraph</span><span> </span><span>(2)(c)</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">If, because of the circumstances described in paragraphs</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(a) and (b):</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">The amount is:</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:180.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following provisions applied to the entity:</span></p><p class="Tablea"><span>(a) former section</span><span> </span><span>61A of the </span><span style="font-style:italic">Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(b) former Subdivision</span><span> </span><span>57</span><span>‑</span><span>I in Schedule</span><span> </span><span>2D to the</span><span style="font-style:italic"> Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(c) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(4) of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td><td style="width:148.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the amount treated as being the cost of the asset under that provision; and</span></p><p class="Tablea"><span>(b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>2</span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following subsections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span><span> applied to the entity:</span></p><p class="Tablea"><span>(a) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(5);</span></p><p class="Tablea"><span>(b) 58</span><span>‑</span><span>70(3)</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The amount treated as being the cost, or the first element of the cost, of the asset under that subsection</span></p></td></tr></tbody></table> ``` (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997, as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="4" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amounts and provisions for different dates of acquisition</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Date of the acquisition</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Amount</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Provision of Division</span><span style="font-weight:bold"> </span><span style="font-weight:bold">58 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> applying to the acquisition and the working out of the amount</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:76.7pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>160</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>220</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>After 30</span><span> </span><span>June 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>First element of the cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subsection</span><span> </span><span>58</span><span>‑</span><span>70(5)</span></p></td></tr></tbody></table> ``` > Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. > Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and ### Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: #### 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70‑45 to 70‑70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420‑51 to 420‑58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (a) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority‑owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority‑owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority‑owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority‑owned entity became a subsidiary member of the group, there was roll‑over relief under section 40‑340 of the Income Tax Assessment Act 1997. (a) while the asset is, because subsection 701‑1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, its tax cost setting amount is taken to be equal to the continuing majority‑owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711‑30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997. (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset becomes that of an entity (a new asset holder) other than the head company because subsection 701‑1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder) acquiring some or all of the membership interests in the new asset holder; and (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset is acquired by another entity (a new asset holder) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll‑over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value asset just before the acquisition; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 #### 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 (b) members of the consolidated group or the MEC group mentioned in subsection 104‑500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701‑1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701‑1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (3) If this section applies, neither subsection 104‑500(4) nor subsection 104‑500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year. ### Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C‑B); and (b) modifies certain rules in Part 3‑90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C‑C). > Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719‑2 and 719‑10 of this Act). 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership #### 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(ii) of that Act (see subsection 719‑2(3) of this Act). (b) a trust (a non‑resident trust) that does not meet the requirements in any item of the table in section 703‑25 of the Income Tax Assessment Act 1997. (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non‑resident company or a non‑resident trust; or Test entity must be a subsidiary member on assumption that non‑resident companies and non‑resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non‑resident company or non‑resident trust were a subsidiary member of the group. (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv). #### 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(iii) of that Act (see subsection 719‑2(3) of this Act). (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C‑10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3). If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C‑10 are met; and (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (ii) an entity that is a transitional foreign‑held indirect subsidiary of the group because of another application of this paragraph; Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign‑held indirect subsidiary would need to have satisfied the set of requirements in either section 701C‑10 or 701C‑15 (1) This Subdivision applies if an entity (the transitional foreign‑held joining entity) that is a transitional foreign‑held subsidiary or a transitional foreign‑held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time) the group comes into existence. (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign‑held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign‑held indirect subsidiary that becomes a subsidiary member at that time takes account of this. (a) section 701‑10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); apply, for the purposes of setting the tax cost of an asset of the transitional foreign‑held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign‑held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. > Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign‑held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign‑held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign‑held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign‑held subsidiary and the other entity. > Note 2: If the transitional foreign‑held joining entity is a transitional foreign‑held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705‑A of the Income Tax Assessment Act 1997, in its application in accordance with Subdivision 705‑B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company. Subsection 701‑35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax‑neutral amount) does not apply to the assets of the transitional foreign‑held joining entity if it is a transitional foreign‑held subsidiary. Section 701‑15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: (a) this section applies to each membership interest in the transitional foreign‑held subsidiary that is held by an entity (an eligible non‑resident) of a kind mentioned in subparagraph 701C‑20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign‑held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701‑1(2) of the Income Tax Assessment Act 1997 applies to the eligible non‑resident in the same way as it applies to the head company. Section 711‑5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: > Note: If the leaving entity is a transitional foreign‑held subsidiary (within the meaning of section 701C‑20 of the Income Tax (Transitional Provisions) Act 1997), this Division will, in accordance with subsection 701‑15(4) of this Act (see section 701C‑40 of the first‑mentioned Act), apply to membership interests that an eligible non‑resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity. (1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707‑C of the Income Tax Assessment Act 1997. (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period. (1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if: (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (d) the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997. (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: (1) The head company of a consolidated group may make a choice in the approved form to apply section 701D‑10 to another entity. (2) However, the head company cannot make that choice if subsection 701D‑10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (a) an asset of the head company because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701‑55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40‑77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40‑77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40‑285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount. (b) after the asset became an asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). > Note: The final entity will be different from the head company if an entity (the leaving entity) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40‑285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. > Note: The final entity will be entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701‑5 (the entry history rule) of that Act and perhaps also section 701‑40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity) became a subsidiary member of the group; and It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). > Note: In some cases, section 705‑47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40‑285(3) of this Act. If: (b) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and subsection 40‑285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701‑10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997. > Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997. (1) For the purposes of Part 3‑90 of the Income Tax Assessment Act 1997, this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960‑G of that Act whether the interest or right is a membership interest of the entity in the other entity. > Note: Under Subdivision 960‑G of the Income Tax Assessment Act 1997, a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001) apply to transactions in relation to the interest or right at the relevant time. Despite the amendments of section 703‑35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) If an entity (the joining entity) to which section 40‑75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time), this Subdivision applies in relation to: (ii) became assets of the head company of the group at the joining time because of section 701‑1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure. (1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). (2) If the joining entity could not deduct an amount under Subdivision 40‑B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701‑55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40‑35, 40‑37, 40‑40 or 40‑43 treated the joining entity as holding a notional asset. > Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705‑30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. (a) deductions under former Subdivision 330‑A, 330‑C or 330‑H of the Income Tax Assessment Act 1997, or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated an entity as holding because of the expenditure. (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); > Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40‑75(4) of this Act, but may have been reset since under Subdivision 40‑B of the Income Tax Assessment Act 1997. > Note 2: The effective life of a notional asset is specified by whichever one of sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act is relevant to the notional asset. (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (9) Section 705‑55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705‑45 of that Act. > Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705‑40 of the Income Tax Assessment Act 1997. (a) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701‑5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. > Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705‑305(3). (ii) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707‑A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member. 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value #### 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707‑320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor) other than the real loss‑maker mentioned in subsection 707‑315(1) of that Act for the bundle; and (b) both the real loss‑maker and the value donor became members of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (ca) neither the real loss‑maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (ii) a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (ii) section 713‑540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (2) It must have been possible for the real loss‑maker to have transferred the loss to the value donor under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss‑maker at the initial transfer time the amount worked out using the formula:  > Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707‑327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss‑maker to the transferee. > total of real loss‑maker’s non‑foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss‑makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) included in a bundle of losses: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. #### 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value (1) This section affects the calculation of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707‑325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936, in the bundle). > Note: This section does not affect the calculation of the real loss‑maker’s modified market value for other purposes (such as the real loss‑maker being a value donor for the purposes of another application of section 707‑325 of this Act). (3) One condition is that the event was an injection of capital directly into the real loss‑maker by the value donor mentioned in section 707‑325 of this Act. (c) that would have caused subsection 707‑325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss‑maker’s modified market value (even if no other events described in subsection 707‑325(4) of that Act had occurred), apart from this section. (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss‑maker (whether or not the event also involved either the value donor or the real loss‑maker); or (1) This section has effect for the purposes of working out under Subdivision 707‑C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707‑325, as if there were added to the modified market value of the real loss‑maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (c) the loss is not a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707‑A of that Act at the initial transfer time had the company: > Note: This section has effect even if the amount added to the real loss‑maker’s modified market value under section 707‑325 is nil because the value donor’s modified market value is nil. (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707‑325, as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (4) If the transferee mentioned in subsection 707‑325(1) chooses, sections 707‑310, 707‑335 (except paragraph 707‑335(2)(a)) and 707‑340 of the Income Tax Assessment Act 1997 (and subsections 707‑315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: > Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707‑325(1)(d) and (e) and subsection 707‑325(2) in an application of section 707‑325 separate from the application of that section mentioned in paragraph (1)(a) of this section. > Note: This means that a loss that provided a basis for section 707‑325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. (b) in connection with the requirement that it must have been possible for a company (the notional transferor) to transfer to another company (the notional transferee) for an income year a loss under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997. (b) ends immediately after the initial transfer time mentioned in subsection 707‑320(1) of the Income Tax Assessment Act 1997. > Note: For the purposes of identifying the trial year using the definition in section 707‑120 of the Income Tax Assessment Act 1997, the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time. (1) Subsection (3) of this section affects the calculation, under section 707‑325 of the Income Tax Assessment Act 1997 and section 707‑325 of this Act, of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (the formation time) the group became a consolidated group; and (b) the provisions described in subsection 707‑327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707‑327(1)(b) and (c) of this Act as if the bundle included the loss; and (d) subsection 707‑325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707‑325(1) of this Act chooses that this section apply in relation to the real loss‑maker. (2) Section 707‑325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. (3) Disregard for the purposes of subsection 707‑325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707‑325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or > Note: Disregarding such an event could have a direct or indirect effect on the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss‑maker’s modified market value calculated under section 707‑325 of the Income Tax Assessment Act 1997, if the real loss‑maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707‑325 of this Act to add an amount to the real loss‑maker’s modified market value for those purposes. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) that: (b) was transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from an entity other than the real loss‑maker. (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997. Disregard an event that is described in subsection 707‑325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707‑325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004. (1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss‑maker) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time) the transferee became the head company of a consolidated group; and (ii) the conditions in one or more of paragraphs 165‑15(1)(a), (b) and (c) did not exist in relation to the real loss‑maker; and (da) the real loss‑maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non‑transferred losses) of the same sort that the transferee made without a transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non‑transferred losses). (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. <table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Limit on utilising the losses</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For this income year:</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the losses that the transferee may utilise cannot exceed:</span></p></td></tr></thead><tbody><tr><td style="width:20.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:120.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The first income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span style="font-size:8pt; vertical-align:2pt">1</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The second income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) </span><span style="font-size:8pt; vertical-align:2pt">2</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the amount of the losses utilised for the income year mentioned in item</span><span> </span><span>1</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The third income year ending after the initial transfer time, or a later income year</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time</span></p></td></tr></tbody></table> ``` (4) Subdivision 707‑C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707‑A of that Act. > Note: This has 2 effects. First, Subdivision 707‑C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707‑A of that Act). (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). (7) This section does not limit the transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company. In working out when a choice may be made under subsection 707‑325(5), 707‑327(5), 707‑328A(4) or 707‑350(5), ignore losses to which section 713‑535 of the Income Tax Assessment Act 1997 applies. > Note: That section deals with losses transferred under Subdivision 707‑A of that Act from certain wholly‑owned subsidiaries of life insurance companies that are members of a consolidated group. Section 707‑405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act. (1) This section reduces the adjustable value of a notional asset that section 40‑35, 40‑37, 40‑38, 40‑40 or 40‑43 treats the head company of a consolidated group as holding, if: (b) that section treats the leaving entity as holding a notional asset because of section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997. > Note: Section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time. The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences. (1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event) happening involving an entity (the originating entity) and another entity (the recipient entity) if: (a) the event occurs in connection with a life insurance company (the member life insurance company) becoming a member of a consolidated group; and (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest) in a company or in another trust. (a) a life insurance company transfers an asset (also the original asset) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320‑200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset) to its segregated exempt assets where, apart from this Subdivision, section 320‑255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event) is made in connection with the life insurance company (also the member life insurance company) becoming a member of a consolidated group. (1) This Subdivision applies only if the originating entity (for a section 713‑505 case) or the life insurance company (for a section 713‑510 case) chooses that it apply. (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713‑510 of the Income Tax Assessment Act 1997; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713‑510 of the Income Tax Assessment Act 1997; and (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs. This Act, and the Income Tax Assessment Act 1997, apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group. (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain) that the originating entity would have made as a result of the deferral event is disregarded; and (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount) under paragraph 320‑15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (1) This section operates if, after the deferral event happens, another event (the new event) happens where the new event is: (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (i) the original asset being transferred to or from the company’s virtual PST under section 320‑180, 320‑185 or 320‑195 of the Income Tax Assessment Act 1997; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320‑235, 320‑240 or 320‑250 of that Act; or (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. > Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713‑505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (1) For a section 713‑505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713‑535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: (a) an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group at a time (the leaving time); and (b) but for the cessation of membership and section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision. Sections 716‑340 and 716‑345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. <table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:345.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Extended operation of sections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 1</span><br><span style="font-weight:bold">Sections</span><span style="font-weight:bold"> </span><span style="font-weight:bold">716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">340 and 716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">345 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> operate in relation to:</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 2</span><br><span style="font-weight:bold">In the same way as they operate in relation to:</span></p></td></tr></thead><tbody><tr><td style="width:5.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:161.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>46</span><span>‑</span><span>90 of that Act</span></p></td><td style="width:156.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>40</span><span>‑</span><span>455 of that Act</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software pool created under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure allocated to a software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Software, expenditure on which was in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>In</span><span>‑</span><span>house software, expenditure on the development of which is allocated to a software development pool</span></p></td></tr></tbody></table> ``` (1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: Section 703‑30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004. (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time) a wholly‑owned subsidiary of the entity that became the head company of the group (the head entity), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier‑1 company of the group at the formation time. Despite the amendment of section 719‑30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) Section 719‑160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719‑160(3) of the Income Tax Assessment Act 1997. (3) However, that effect of section 719‑160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division. (2) Paragraphs 701‑1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier‑1 company at the time the MEC group came into existence. (a) the entity and one or more other entities were members of a potential MEC group as eligible tier‑1 companies, throughout the period: (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier‑1 company, at the time the transitional group came into existence. To avoid doubt, sections 707‑325 and 707‑327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719‑305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707‑A of that Act. Subsection 719‑325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006. (1) A reference in an agreement to item 25 of the table in subsection 721‑10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: (1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: Division 725 applies to a scheme entered into on or after 1 July 2002. It also applies to a scheme entered into on or after 27 June 2002, but only if: ### Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (1) Division 727, as inserted by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 and amended by the New Business Tax System (Consolidation and Other Measures) Act 2003, applies to a scheme entered into on or after 1 July 2002. (b) a presumed indirect value shift that happens under the scheme and affects a realisation event that happens on or after 1 July 2002. (a) the economic benefits taken into account in determining that the scheme has resulted in that indirect value shift or presumed indirect value shift include economic benefits provided by: > Note: In that case, the consequences of the trigger event are worked out under Division 138 or 139 of the Income Tax Assessment Act 1997: see items 13 and 14 of Schedule 15 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002. (1) An indirect value shift does not have consequences under Division 727 of the Income Tax Assessment Act 1997 if, to the extent of at least 95% of their total market value, the greater benefits consist entirely of: (a) a right to have services that are covered by section 727‑240 of that Act provided directly by the losing entity to the gaining entity; or (d) if the losing entity’s 2002‑2003 income year ends before 30 June 2003—the start of the losing entity’s 2004‑2005 income year. (2) For the purposes of section 727‑850 (about a presumed indirect value shift affecting a realisation event) of the Income Tax Assessment Act 1997, subsection (1) of this section applies to the presumed indirect value shift: #### 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (2) Paragraph 727‑470(2)(a) of the Income Tax Assessment Act 1997 (as in force immediately before the commencement of this section) continues to have effect in relation to the indirect value shift as if the repeals and amendments made by Schedule 1, Parts 1 and 2 of Schedule 3 and Schedule 8 to the Tax Laws Amendment (Small Business) Act 2007 had not been made. ## 137‑10 Applicable CGT events 137‑10 Applicable CGT events ## Division 140 Share value shifting ## Subdivision 140 ‑A—When is there share value shifting? ## 140‑7 Pre‑1994 share value shifts irrele 140‑7 Pre‑1994 share value shifts irrelevant You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. ## 140‑15 Off‑market buy backs 140‑15 Off‑market buy backs (a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and (b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996. ## Division 149 When an asset stops being a pre‑CGT asset ## 149‑5 Assets that stopped being pre‑CGT 149‑5 Assets that stopped being pre‑CGT assets under old law (c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. ## Division 152 Small business relief ## 152‑5 Small business roll‑over chosen bu 152‑5 Small business roll‑over chosen but no capital gain returned (a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and (c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over. (3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. ## 152‑10 Small business roll‑over not chos 152‑10 Small business roll‑over not chosen and time remains to acquire a replacement asset (a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and (c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and (d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act. (3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. ## 152‑15 Amendment of assessments 152‑15 Amendment of assessments Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division. ## Part 3 ‑5—Corporate taxpayers and corporate distributions (a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and (2) Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001 (the new Act) applies to the plant on this basis: (a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant’s opening adjustable value; and (b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and (c) if you excluded an amount from your assessable income under section 42‑290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999—the cost of the plant, and its opening adjustable value, are reduced by that amount; and (d) if subparagraph (1)(b)(ii) applies to you—you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi‑owner of the plant under the former Act continue. (3) If you were using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis: (a) for the diminishing value method—replace the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate you were using; and (i) replace the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate you were using; and (ii) increase the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note 1: Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced. > Note 2: Small business entities can choose to work out the decline in value of their depreciating assets under Division 328. (a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or (3) If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40‑70(1) or 40‑75(1) of the new Act that includes the plant’s effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and (2) For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets. (3) For a case where the plant is merged into another depreciating asset, section 40‑125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it. (b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and (a) you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and (b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU’s opening adjustable value. (1) Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001. (2) For a unit of software for which you were deducting amounts under Subdivision 46‑B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis: (d) you must use the same effective life you were using under Subdivision 46‑B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001. (1) This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day. (b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and (c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and (1) This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001. > Note: Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8). (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330‑80 of the former Act for your income year ending on 30 June 2001; and (c) in applying the formula in section 40‑75 of the new Act for the income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The remaining effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these: (i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and (ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (7) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and (b) the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of expenditure incurred in carrying on eligible quarrying operations—the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (i) you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day) after 30 June 2001; or (ii) the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day) after 30 June 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which the start day occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year. there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (1) This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330‑H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and (c) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (i) any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset); (i) any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (4) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (4) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (b) the expenditure would have been transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330‑H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for your income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (1) Despite subsections 40‑35(5), 40‑38(5) and 40‑40(4), there is no additional decline in the value of the notional asset referred to in those subsections if: (a) apart from this section, subsection 40‑35(5), 40‑38(5) or 40‑40(4) would apply because the real asset referred to in that subsection is disposed of; and (a) at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373‑35 of the former Act; and (b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day. (a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and (1) Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time). (2) Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time. (a) you have deducted or can deduct an amount under Subdivision 387‑G of the former Act for an amount (the qualifying amount) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and (b) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and (1) This section applies to you if you have deducted or can deduct an amount under Subdivision 400‑A of the former Act for an amount (the qualifying amount) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400‑A of the former Act. (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and (c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400‑15(3) of the former Act; and (1) Units of plant that you had allocated to a pool under Subdivision 42‑L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act. (a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and (c) in applying the formula in section 40‑70 of the new Act for your income year in which 1 July 2001 occurs—it has a base value equal to that opening adjustable value; and (d) you replace the component in the formula in subsection 40‑70(1) of the new Act that includes an asset’s effective life with the pool percentage you were using for the pool; and (e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40‑115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and (f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset. (3) An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item). > Note 1: You work out the decline in value of an item removed under this subsection under Subdivision 40‑B of the new Act, using the cost for it worked out under section 40‑205 of the new Act. (b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset. (2) The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year) in this way: (a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and (b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section. (a) for a unit of plant (including IRUs and expenditure on software that is not pooled)—its undeducted cost at the end of 30 June 2001; or (b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence—the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or (c) for transport capital expenditure—the entity’s amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or (d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (e) for expenditure on evaluating the impact on the environment of a project—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (f) for assets that were pooled under Subdivision 42‑M or 42‑L of the former Act—the closing balance of the pool at the end of 30 June 2001. (4) The asset’s base value for applying the formula in section 40‑70 of the new Act for the diminishing value method is that opening adjustable value. (5) The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an item of plant for which you were using the prime cost method—using the rules in section 40‑10 of this Act; and (c) for a unit of software for which the entity was deducting amounts under Subdivision 46‑B of the former Act—using the rules in subsection 40‑25(2) of this Act; and (f) for an amount of expenditure on evaluating the impact on the environment of a project—using the rules in section 40‑55 of this Act. (6) The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an amount of unrecouped expenditure under Division 330 of the former Act—using the rules in section 40‑35 of this Act; and (b) for an amount of transport capital expenditure under Division 330 of the former Act—using the rules in section 40‑40 of this Act; and (7) The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act. (a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑C of the former Act; or (b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑H of the former Act; or (c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387‑B of the former Act; or (d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; or (e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365. (9) The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001. (10) You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount). (11) You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount. (1) Subsections 40‑65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened: (b) you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act. (a) paragraph 40‑65(6)(a) of the Income Tax Assessment Act 1997 included both events set out in subsection (1) of this section; and (b) subsections 40‑65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events. (1) A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936. (2) An amount you have deducted or can deduct for a water facility under Subdivision 387‑B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40‑F of the new Act. (3) A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936. (a) you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40‑115 (about splitting a depreciating asset) or 40‑125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and (b) it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40‑72 of that Act; (2) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if: (c) it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40‑72 of that Act. (3) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset) before 10 May 2006 if: (b) the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and (d) it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40‑72 of that Act. (a) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you: (b) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001. (2) If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act. (3) Otherwise, Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section. (a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or (b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or (ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life. (1) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001. > Note: If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40\. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997. (1A) Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001. (1B) Subsection (1) applies to a mining, quarrying or prospecting right (the new right) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if: (i) the other company is a member of the same wholly‑owned group as the original holder and was a member of that group just before that day; and (ii) the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer. (1D) Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if: (b) the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001. (a) you acquired, under an interest realignment arrangement, an interest (a new interest) in a mining, quarrying or prospecting right; and (b) the interest was acquired in exchange for one or more other interests (old interests) in other mining, quarrying or prospecting rights; and Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001. (a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or (b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership; the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act. (3) An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that: (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act. (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act. (6) Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243. (7) An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if: (a) you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and (8) The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section. (c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act. (2) Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001. A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act. if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011. (2) The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011. (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset for an income year is the amount worked out under section 40‑130 if: (a) the income year is the year in which you start to use the asset, or have it installed ready for use, for a taxable purpose; and (b) subsection (2) (about businesses with turnover less than $500 million) applies to you for the year and for the income year in which you started to hold the asset (if that was an earlier year); and > Note 1: An effect of paragraph (1)(a) is that this Subdivision only applies to one income year per asset. See also subsection 40‑135(1). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $500 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. Exception—assets for which the decline in value is worked out under section 40‑82 or Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (3) However, this section does not apply to a depreciating asset for an income year if you work out the decline in value of the asset for the income year under any of the following: (1) For the purposes of paragraph 40‑120(1)(c) and section 328‑182, you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you: > Note: Section 328‑182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997. (i) entering into a contract under which you hold the post‑12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑12 March 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post‑12 March 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (8) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (9) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (10) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (1) For the purposes of section 40‑120, the decline in value for the income year in which paragraph 40‑120(1)(a) is satisfied (the current year) is: > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 12 March 2020 to 30 June 2020 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2020 to 30 June 2021. (a) 50% of the asset’s cost as at the end of the current year, disregarding any amount included in the second element of the asset’s cost after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997, assuming its cost were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (3) However, the amount worked out under subsection (2) for an income year cannot be more than the amount that is the asset’s cost for the year. (a) 50% of the sum of the asset’s opening adjustable value for the current year and any amount included in the second element of its cost for that year, disregarding any amount included in that second element after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997 assuming: (ii) for the prime cost method—the component “Asset’s \*cost” in the formula in subsection 40‑75(1) of that Act (as adjusted under that section) were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (b) for the prime cost method—the sum of its opening adjustable value for the income year and any amount included in the second element of its cost for that year. (1) The decline in value of a depreciating asset is not worked out under this Subdivision for an income year if this Subdivision already applied in working out the decline in value of the asset for an income year. (2) For an income year later than the year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (3) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (4) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) You may choose that the decline in value of a particular depreciating asset for an income year, and subsequent income years, is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the first income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. If this Subdivision applies to work out the decline in value of a depreciating asset you hold for an income year, no other provision of this Act or the Income Tax Assessment Act 1997 applies to work out that decline in value. (1) For the purposes of this Subdivision, you are covered by this section for a depreciating asset if, on or before 30 June 2023: (2) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (3) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or Exception—assets for which the decline in value is worked out under Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (a) the asset is allocated to a low‑value pool, or expenditure on the asset is allocated to a software development pool (see Subdivision 40‑E of the Income Tax Assessment Act 1997); or (b) you or another taxpayer has deducted or can deduct amounts for the asset under Subdivision 40‑F of the Income Tax Assessment Act 1997 (about primary production depreciating assets). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $5 billion; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this section. (ii) if the 2019‑20 income year ends on or before 6 October 2020—the sum of your ordinary income (if any) and statutory income (if any) for the 2019‑20 income year; and (c) the sum of the amounts worked out under subsection (3) for the 2016‑17, 2017‑18 and 2018‑19 income years exceeds $100 million. (b) next, work out the cost of each of those assets (including any amounts included in the second element of the asset’s cost at a time that is in the income year); (4) For the purposes of subsection (3), disregard an asset if, at the time you first used the asset, or had it installed ready for use, for a taxable purpose: (a) it was not reasonable to conclude that you would use the asset principally in Australia for the principal purpose of carrying on a business; or (5) For the purposes of paragraph (3)(b), to work out the cost of a depreciating asset that is capital works (see section 43‑20 of the Income Tax Assessment Act 1997): (a) disregard section 40‑45 of that Act and work out the cost of the capital works using Subdivision 40‑C of that Act; and (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under subsection (3) if: (a) where section 40‑155 covers you for the current year (regardless whether section 40‑157 also covers you for the current year)—an exclusion applies to you and the asset for the current year under section 40‑165 (about exclusions for businesses with turnover of $50 million or more); or (ii) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s start time occurs in the current year—the asset’s cost as at the end of the current year, disregarding any amount included in the asset’s cost after 30 June 2023; or (b) if the asset’s start time occurred in an earlier year—the sum of its opening adjustable value for the current year and any amount included in the second element of its cost for the current year, disregarding any amount included in the asset’s cost after 30 June 2023. > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 6 October 2020 to 30 June 2021 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2021 to 30 June 2022. (a) where paragraph 40‑160(2)(a) applies—section 40‑155 would not cover you for the income year if the reference in that section to $5 billion were instead a reference to $50 million; and (i) entering into a contract under which you hold the post‑6 October 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑6 October 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of satisfying paragraph 40‑160(1)(a) for the post‑6 October 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you already satisfied paragraph 40‑160(1)(a) of this Act for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (9) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (1) For the purposes of subsections 40‑160(2) and 40‑170(1A), an exclusion applies to you and an asset for an income year if any of the exclusions in this section applies in relation to the asset. (4) This exclusion applies in relation to the asset if the asset is available for use, at any time in the income year, by any of the following: (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under this section if: (ii) you started to use the asset, or have it installed ready for use, for a taxable purpose in an earlier income year; and (b) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under section 40‑82 of the Income Tax Assessment Act 1997—the amount worked out under subsection (3); or (b) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under Subdivision 40‑BA of this Act—the amount worked out under subsection (4); or Assets affected by section 40‑82 of the Income Tax Assessment Act 1997 (about assets costing less than $150,000, medium sized businesses) (a) the amount that would be the asset’s decline in value for the year under section 40‑82 of the Income Tax Assessment Act 1997, assuming the reference in subparagraph 40‑82(3A)(b)(ii) of that Act to 31 December 2020 were instead a reference to the 2020 budget time; and (a) the amount that would be worked out under paragraph 40‑130(2)(a) or (4)(a) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(a) and (4)(a) to 30 June 2021 were instead references to the 2020 budget time; and (c) the amount that would be worked out under paragraph 40‑130(2)(b) or (4)(b) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(b) and (4)(b) to “the amount worked out under paragraph (a)” were instead references to “the amounts worked out under paragraphs 40‑170(4)(a) and (b)”. (a) the amount that would be the asset’s decline in value for the year under Division 40 of the Income Tax Assessment Act 1997, disregarding any amounts included in the eligible second element worked out under section 40‑175 of this Act for the asset for the year; and The amount worked out under this section (the eligible second element) for a depreciating asset for an income year is the sum of any amounts included in the second element of the asset’s cost at a time that is in both of the following periods: (1) For an income year later than a year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (2) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (3) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) This section applies if the decline in value for a depreciating asset for an income year is worked out under this Subdivision, and at a time (the balancing adjustment time) in a later income year: (i) it becomes not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (b) none of the requirements in paragraphs 40‑295(1)(a), (b) or (c) of the Income Tax Assessment Act 1997 are satisfied in relation to the asset. (2) For the purposes of Subdivision 40‑D of the Income Tax Assessment Act 1997 assume that, at the balancing adjustment time, you stop using the asset, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again. (3) For the purposes of section 40‑180 of the Income Tax Assessment Act 1997 assume that the reference in item 3 of the table in subsection 40‑180(2) of that Act to “because you stop using it for any purpose expecting never to use it again” were instead a reference to “because of section 40‑185 of the Income Tax (Transitional Provisions) Act 1997”. (4) If a balancing adjustment event happens to a depreciating asset you hold because of this section, this Subdivision cannot apply to work out the decline in value of the asset for a later income year. (1) You may choose that the decline in value of a particular depreciating asset for an income year is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year. (1) Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40. (a) you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset: (ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and (4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day. (5) The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if: (i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or (ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and  > sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose. (7) Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens: (a) if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b). (i) an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and (ii) the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and (3) The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount. (a) on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and (c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and (ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal; (2) There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal. (3) Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount. If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997. (a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and (b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and: (i) the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, the R&D entity is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—a clawback amount under section 355‑447 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑466 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. (b) section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions. > Note 2: The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and: (i) the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset; (ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, an R&D entity (the partner) that is a partner in the R&D partnership and is entitled to one or more new law deductions for one or more income years for the asset, is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—a clawback amount under section 355‑449 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑468 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s new law deductions mentioned in paragraph (2)(b) of this section. (4) Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event. > Note: Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions. (1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant. (b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and (3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it. (a) there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and (b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act. (2) The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor. (3) The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and <table cellspacing="0" cellpadding="0" style="width:364.2pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:353.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading" style="page-break-inside:avoid"><span>Conditions for small business taxpayers retaining accelerated rates</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Condition</span></p></td></tr></thead><tbody><tr><td style="width:21.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:321.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>The transferee must have been a small business taxpayer for the income year (the </span><span style="font-weight:bold; font-style:italic">start year</span><span>) that includes the time when the entity first used the plant, or first had it installed ready for use.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>2</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>At that time, neither of these applies:</span></p><p class="Tablea"><span>(a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;</span></p><p class="Tablea"><span>(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection</span><span> </span><span>(5).</span></p></td></tr></tbody></table> ``` (4) For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership. (5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement. (a) for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or (i) replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and (ii) increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).  (b) if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11). (c) that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and (d) that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and (e) that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity. (a) for taxable supplies (if any) the entity makes during the year in the course of carrying on a business—the value (as defined by section 9‑75 of the GST Act) of the supplies; and (b) for other supplies the entity makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies. (1) The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for: (a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (c) for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or (d) for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant. (3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115. (4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain. (5) Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee. (i) the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or (a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and (1) A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act. (2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year. For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if: Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act. (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset): and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply. (i) for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or (ii) for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and (c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act. (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and (2) Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act. The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under: (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on: (2) You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act. (3) A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under: (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and (2) Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act. A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act. The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001. If: (d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act; (a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and (a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and (b) the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and (c) paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997. Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years. (1) For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section. (b) the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (b) that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (1) There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea" style="page-break-after:avoid"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a); and</span></p><p class="Tablea" style="page-break-after:avoid"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (b) disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (f) an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division. (4) If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45‑5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest. (5) If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45‑10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest. Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Disregard the use of the following amounts in determining (for the purposes of Subdivision 50‑A of the Income Tax Assessment Act 1997 whether a fund established before 1 July 1997 operates and pursues its purposes in Australia: Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years. (2) However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date. Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if: (b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time. Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years. 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years (1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act. <table cellspacing="0" cellpadding="0" style="margin-left:56.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:258.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Application provisions for specific sections</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-size:9pt; font-weight:bold">Item</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">This section of the </span><span style="font-size:9pt; font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-size:9pt; font-weight:bold"> ...</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">Applies as described in this provision of this Act ...</span></p></td></tr></thead><tbody><tr><td style="width:24.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55(1)</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>95</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>8</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td></tr></tbody></table> ``` (a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and (b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997. > Note: Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year. (b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997; sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997). > Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock. (3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997. (a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and (b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936; > Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal. #### 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997. (1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year. (2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936. (3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year: (a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners; (b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed. > Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year. > Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year. (b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year; the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year. (2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. (3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2). #### 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997. #### 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business (1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. (2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity. > Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997. (1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. (2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value. > Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997. #### 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year. (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. > Note: Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. > Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given). (5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act). (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment. > Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%. (5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%. (6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.  > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section. (b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4). Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age. Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later. Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies. Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3. (4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997. (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%. > Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986. (5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D. > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. (a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and (b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year). (3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and (2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual: (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income. > Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F. > Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997. > Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997. #### 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 (1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012. (2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies. (3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act. (b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009. (2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if: (i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest; (iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or (i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest; (iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009. (2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time. (4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2): (a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and (b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being: (ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and (c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and (d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if: (i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or (ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and (e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and (i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and (ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and (g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest. (a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced: (i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or (ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and (b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5. (2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right. (3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right. (2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. (3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section. Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years. (1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision. > Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision). > Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936). > Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997. (a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936. (1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936. (2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997. > Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997. (3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and (d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; (f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time. > Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and (d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015. (a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or (4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if: (b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset. The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year. (a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and (1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied: (b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and (d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works). (3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936. Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936. (b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006. (2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement. > Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement. Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual: (b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her. 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act (1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee). (2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year: (3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection. #### 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997. Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936). (2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if: (a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; (a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011); (b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986. > Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section. If: (a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and (b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936; Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995. (1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997. (2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997. (3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997. (4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997. > Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one. Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year: (a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and (b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year; the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation. Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset. (b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section); > Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply. (1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if: (a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and (2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value. (4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value. (a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997. (2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less. (1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936: (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. (1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if: (2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by: (a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or (a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or (2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period. Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year: If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997. (1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002. (2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset. (3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required. (i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and (ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and (c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and (f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997). (a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or (1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:  > total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part. (a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or (2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section. (3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1). (1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences. > Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997. (c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets). (4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act. (5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act. Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement. (a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and (2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time. (a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and (ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs. (2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer. (a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and (b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest; (2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event. (3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly. (4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly. <table cellspacing="0" cellpadding="0" style="width:362.55pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:351.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Creating a CGT asset</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">CGT event number</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Applicable amount</span></p></td></tr></thead><tbody><tr><td style="width:50.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D1</span></p></td><td style="width:290.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the incidental costs the originating company incurred that relate to the CGT event</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D2</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the option</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D3</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the right</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>F1</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred on the grant, renewal or extension of the lease</span></p></td></tr></tbody></table> ``` (5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day. A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision. (a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996. (b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. (b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend. (3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities. (1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company. (2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred. (3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company. (1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of: (2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of: (3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note. (1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised. (b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and (ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act. You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and (b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996. (c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and (c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over. (3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. (a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and (c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and (d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act. (3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division. Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years. A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: (1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day. (2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice. (a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and (b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and (a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and (b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and (c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group. (5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004. (6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection. (1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss): (b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions); and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time: (i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or (e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and (f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and (ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred; (2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if: (a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these: (i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset; (ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and (3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act. (a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and (b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section. (5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of: (a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and (b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset. Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. (ii) that could have been deducted, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the deduction had not been limited by the company’s income for that income year; and (ii) that could have been applied, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the application of the loss had not been limited by the company’s capital gains for that income year. 170‑C Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred #### 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years. #### 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). #### Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997. Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997. If: (a) all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (d) that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and (e) the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place. Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years. > introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament. Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day. #### Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting #### 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B. (1) The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day. (2) No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted. #### 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting (1) Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if: (a) the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and (b) none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount. (2) No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount. (1) This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account. (2) For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. > Note 2: If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60. (3) For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)). (4) For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. (5) The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if: (a) during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and (b) the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section. (a) the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and (b) during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components. (7) For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. (8) Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it: (b) the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component. (9) Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component. (10) For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002: (b) lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination; (c) a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination); (e) the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination); (f) the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination). Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period: 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows: (a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and (i) in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and (ii) in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. > Note: A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002. #### 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002: (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:23.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:87.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A franking surplus</span></p></td><td style="width:220.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.009.png" width="175" height="58" alt="Start formula Amount of the class A franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.010.png" width="190" height="56" alt="Start formula Amount of the class B franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.011.png" width="190" height="56" alt="Start formula Amount of the class C franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` #### 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus): (a) a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Original surplus</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:85.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>class A</span></p></td><td style="width:220.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.012.png" width="169" height="38" alt="Start formula Amount of the original class A surplus times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.013.png" width="169" height="38" alt="Start formula Amount of the original class B surplus times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.014.png" width="169" height="38" alt="Start formula Amount of the original class C surplus times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (4) If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit): (a) a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company. (5) The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking deficit into 1997 Act franking debit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Original deficit</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking debit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(4)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:70.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A</span></p></td><td style="width:235.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.015.png" width="164" height="38" alt="Start formula Amount of the original class A deficit times start fraction 39 over 61 end fraction end formula "></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.016.png" width="164" height="38" alt="Start formula Amount of the original class B deficit times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.017.png" width="164" height="38" alt="Start formula Amount of the original class C deficit times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (2) A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if: (c) the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions. (3) The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if: (b) the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and (1) While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit. (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year. (3) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: > Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act. (1) The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account. (a) a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time; (3) If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if: (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity. #### 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If: the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time. (1) Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections. (2) If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year. Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year. Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year. (5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in: that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement. (6) The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (7) The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (2) The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (3) The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (i) are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and (a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and (b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section. (a) whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and (1) This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002. (a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and (3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded. (1) This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002; (2) If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (3) If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (4) If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. (5) If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows: (a) any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and (i) in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and (ii) in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. #### 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF.  #### 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act). (2) If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus): (a) a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF. (4) If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit): (a) a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF. This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period). (1) The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period: (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (1) The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period. (2) The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner. (3) The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5. (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and (d) the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner; the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received. (3) A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time: (1) A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends. (2) However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period. (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (a) the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed: (d) the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and (e) the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return. (2) The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day. (1) The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period. (2) The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made. Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period. (b) on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax); the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed: (c) the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and (d) the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return. (2) The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day. The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period: If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day. If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and If: (a) a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and (b) the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment; In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment. If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment. The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with. If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953. (1) Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period. (a) the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and (b) the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3); the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on: (c) if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or If: Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax. Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division. If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997. (a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day: (3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002. (a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002: > Note: As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date. (b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997. In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003. (1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year. (a) a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of: (i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time; (iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period; (2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if: (b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time: (ii) the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. > Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. > Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. (7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table: <table cellspacing="0" cellpadding="0" style="width:365.35pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount of the franking credit and the exempting debit</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">If:</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the credit and debit is:</span></p></td></tr></thead><tbody><tr><td style="width:22.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The period starts immediately after 7.30</span><span> </span><span>pm by legal time in the Australian Capital Territory on 13</span><span> </span><span>May 1997</span></p></td><td style="width:141.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Both these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was not in surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>All these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was in surplus at the start of the period;</span></p><p class="Tablea"><span>(c) the surplus in the account at the switch time is greater than the surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the franking surplus in the Australian company’s franking account at the switch time; and</span></p><p class="Tablea"><span>(b) the franking surplus in the Australian company’s franking account at the start of the period</span></p></td></tr></tbody></table> ``` (a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and (b) the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period. Subdivision 235‑I of the Income Tax Assessment Act 1997 applies to assets acquired by the trustee of an instalment trust in: (1) Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years. (2) However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time). (3) The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997. Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997. (2) Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in: (1) Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that: (b) is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose. (a) if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007. > Note: To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997. (b) contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option; the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option. (3) For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5). (4) If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is: (a) the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less (b) the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest. (5) If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is: (6) If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil. (1) If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one. (2) If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year. (3) If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year. (a) for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and (b) for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year: Step 1. Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. Step 2. Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3). Step 3. If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year. > Note: Example: Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75): (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred: (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times: (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate. Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008. (a) the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and (b) the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities: (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (i) the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or (ii) the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and (f) none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made: (i) Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event; (ii) a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year. (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (b) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (c) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year #### 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year (a) the requirements set out in paragraphs 275‑610(1)(a), (b) and (c) of the Income Tax Assessment Act 1997 are satisfied in respect of an amount of non‑arm’s length income of a managed investment trust in relation to an income year; and (b) the managed investment trust became a party to the scheme mentioned in paragraph 275‑610(1)(a) of that Act before the day on which the Bill that became the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 was introduced into the House of Representatives; and Division 276 of the Income Tax Assessment Act 1997 as inserted in that Act by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (the amending Act) applies as set out in subitem 1(1) of Schedule 8 to the amending Act. (b) if the trustee of the trust has made a choice for the purposes of paragraph 1(1)(b) of Schedule 8 to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016—the first income year starting on or after 1 July 2015; or (c) if the trustee of the trust has made a choice for the purposes of subparagraph 276‑10(1)(e)(i) of the Income Tax Assessment Act 1997 in respect of the 2016‑17 income year—that income year. (c) the trust is an AMIT for an income year (the discovery year) that is the starting income year or a later income year. (1) This section applies if the trust has an under or over of a character in the discovery year relating to the base year. (b) if, at a time, the trust sent its members distribution statements for an income year that is prior to the starting income year—assume that the trust sent those members AMMA statements for that income year at that time. (3) For the purposes of Division 276 of the Income Tax Assessment Act 1997, treat the under or over mentioned in subsection (1) as an under or over of the AMIT, in the discovery year relating to the base year, of the character mentioned in that subsection. (a) had the under or over mentioned in subsection (1) been discovered before the starting income year, this Act would have operated to produce a particular effect (the pre‑AMIT scheme effect) for the base year in relation to the amount or amounts reflected in the under or over; and 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT #### 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT (b) working out the amount (if any) of the entity’s capital gain under subsection 104‑70(4) of the Income Tax Assessment Act 1997. (3) For the purpose of working out the amount of the non‑assessable part mentioned in paragraph 104‑70(1)(b), treat the following provisions as being in operation at the time the payment was made: (b) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in paragraph (a). (4) Subsection (3) does not apply to the extent (if any) that the entity, in the income tax return that it lodged for the income year in which the payment was made, included the amount of the payment in its assessable income for that income year. (5) For the purposes of section 118‑20 of the Income Tax Assessment Act 1997, treat this section as being in Part 3‑1 of that Act. (2) The Commissioner cannot amend the entity’s assessment for the income year in which the payment was made in a particular way if: (b) the Commissioner could not amend the assessment in that way if the following provisions were in operation at the time the payment was made: (ii) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in subparagraph (i); and Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82‑10F). (2) The object of this section is to apply (with modifications) provisions limiting deductibility in respect of certain contributions made during the period that: (a) Subdivisions AA and AB of Division 3 of Part III of the Income Tax Assessment Act 1936, as in force just before they were repealed by the Superannuation Legislation Amendment (Simplification) Act 2007; (b) any other provision of the Income Tax Assessment Act 1936, or of any instrument made under that Act, to the extent that it relates to the operation of those Subdivisions; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of those Subdivisions. (b) the deduction limit mentioned in section 82AAC for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (c) the deduction limit mentioned in section 82AAT for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (d) Division 290 of the Income Tax Assessment Act 1997 did not apply to contributions made during the income year mentioned in paragraph (a). (2) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of a defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection and subsection (4), the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 5 September 2006; (b) the defined benefit interest mentioned in paragraph (2)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 5 September 2006, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (2)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (4) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of the defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection, the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 12 May 2009; (b) the defined benefit interest mentioned in paragraph (4)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 12 May 2009, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (4)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (1) The object of this section is to apply (with modifications) provisions relating to excess non‑concessional contributions tax in respect of certain contributions made during the period that: (b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision. (ea) in a case where paragraph 292‑95(1)(b) of that Act would have allowed the contribution mentioned in that paragraph to be made at a time within that period—that paragraph allowed the contribution to be made on or before 30 June 2007; and (f) paragraph 292‑95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and (fa) in a case where subsection 292‑100(2), (4), (7) or (8) of that Act would have allowed the contribution mentioned in that subsection to be made at a time within that period—that subsection allowed the contribution to be made on or before 30 June 2007; and (g) paragraph 292‑100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and (h) contributions made during that period that are covered under section 292‑100 of that Act reduce the person’s CGT cap amount for the 2007‑2008 financial year in accordance with subsection 292‑105(2) of that Act (and despite subsection (1) of that section); and (i) if the conditions in subsection (4) are satisfied—the person’s excess non‑concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and (b) the Commissioner gives the person a transitional release authority under subsection 292‑80A(2) in response to the application; and (c) the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292‑80B within 21 days after the date of the release authority; and (d) the superannuation provider pays the person the amount required under section 292‑80C in relation to the transitional release authority. (b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act). (6) The amount to be included in the first person’s amount of non‑concessional contributions under subparagraph (3)(b)(ii) is the sum of: (a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and (b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made. (c) under Division 295 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)), the contribution is included in the assessable income of the superannuation provider in relation to the superannuation plan to which the contribution is made; and (8) For the purposes of paragraph (7)(b), treat the person as an employee of the other entity if the person would be treated as an employee of the other entity under Division 290 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)). (1) A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007. (2) The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292‑80(3)(b)(i), the person would have excess non‑concessional contributions for the financial year mentioned in paragraph 292‑80(3)(a). (4) For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out: The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 21 days after the date of the release authority. (1) A superannuation provider that has been given a transitional release authority in accordance with section 292‑80B must pay to the person within 30 days after receiving the release authority the least of the following amounts: (a) if the person requests the provider in writing to pay a specified amount in relation to the release authority—that amount; (c) the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person in complying superannuation plans. > Note 1: Section 288‑95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection. > Note 2: Section 288‑100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority. > Note 3: For reporting obligations on the superannuation provider in these circumstances, see section 390‑65 in Schedule 1 to the Taxation Administration Act 1953. (2) The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person in complying superannuation plans. (3) Section 307‑125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section. (a) your non‑concessional contributions cap for the 2015‑2016 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsection 292‑85(7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 applies after the commencement of this section as if: (d) subsection 292‑85(6) of that Act as so amended had been applied (taking into account paragraph (c) of this subsection) for the purposes of working out your non‑concessional contributions cap for the 2016‑2017 financial year. (2) For the purposes of working out your non‑concessional contributions caps for the 2017‑2018 financial year and the 2018‑2019 financial year, if: (a) your non‑concessional contributions cap for the 2016‑2017 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsections 292‑85(6) and (7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 apply after the commencement of this section as if the amount worked out under subsection 292‑85(5) of that Act as so amended were $380,000. (3) To avoid doubt, this section does not affect your non‑concessional contributions cap for any financial year that ended before 1 July 2017. The tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your non‑concessional contributions (see section 292‑90 of the Income Tax Assessment Act 1997) for the financial year. (2) Subject to section 294‑55, the amendments of Division 294 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Treasury Laws Amendment (2017 Measures No. 2) Act 2017 apply on and after 1 July 2017. Despite sections 294‑30 and 294‑140 of the Income Tax Assessment Act 1997 (which are about when you have excess transfer balance), you do not have excess transfer balance in your transfer balance account on any day in the period of 6 months beginning on 1 July 2017 if: (a) the only transfer balance credits in the account in that period arose under item 1 of the table in subsection 294‑25(1) of that Act (which is about superannuation income streams you have just before 1 July 2017); and (b) the sum of those transfer balance credits exceeds your transfer balance cap, but is less than or equal to $1,700,000; and (c) at the end of the period, the sum of all the transfer balance debits arising in your transfer balance account equals or exceeds the amount of the excess from paragraph (b). (1) Despite subsection 294‑10(2), a transfer balance credit arises under item 4 of the table in subsection 294‑25(1) of the Income Tax Assessment Act 1997 only in relation to a borrowing that arises under a contract entered into on or after 1 July 2017. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2017 is treated as if it arose under a contract entered into before 1 July 2017 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) on 1 July 2017, a transfer balance debit arose in your transfer balance account under item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997; and (b) the sum of all the transfer balance credits that arise in your transfer balance account under item 1 of the table in subsection 294‑25(1) of that Act exceeds the amount that would, apart from this section, be the amount of that debit. (2) Despite column 2 of item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997, the amount of the transfer balance debit is instead equal to the sum worked out under paragraph (1)(b) of this section. 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain > The object of this Subdivision is to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the following legislative changes: (a) the introduction of a transfer balance cap (as a result of Schedule 1 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016); (b) the exclusion of transition to retirement income streams (and similar income streams) from being superannuation income streams in the retirement phase (as a result of Schedule 8 to that Act). (a) starting on the start of the day on which the Bill that became the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 was introduced into the House of Representatives; and (a) at the start of the pre‑commencement period, a CGT asset of a fund is a segregated current pension asset of the fund; and (i) at a time (the cessation time) in the pre‑commencement period, the asset ceases to be a segregated current pension asset of the fund; or (ii) at the start of 1 July 2017 (also the cessation time), the asset ceases to be a segregated current pension asset of the fund because it supports a superannuation income stream covered by subsection 307‑80(3) of the Income Tax Assessment Act 1997; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (b) the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year is greater than nil; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and #### 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑115(3)(a), the fund makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the fund’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Subsection 295‑390(1) of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). > 2016‑17 non‑exempt proportion means 1 minus the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year. #### 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset (i) the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997 in respect of the trust for the 2016‑17 income year; (ii) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year; and (d) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and #### 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑125(3)(a), the trust makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the trust’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Section 295‑400 of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). (a) unless paragraph (b) applies—1 minus the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997; or (b) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage worked out by subtracting the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year from 100%. This Subdivision applies to an entity that is the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust. For the purposes of this Subdivision, an asset is a 30 June 1988 asset of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust if the entity owned it at the end of 30 June 1988. > Note: Section 295‑90 of the Income Tax Assessment Act 1997 treats these assets as having been acquired on 30 June 1988. (1) The first element of the cost base of each 30 June 1988 asset of the entity’s is the greater of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). (2) The first element of the reduced cost base of each 30 June 1988 asset of the entity’s is the lesser of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). the market value of the asset as at the end of 30 June 1988 is the average of the highest and lowest trade prices for identical assets recorded on 30 June 1988 in whichever of the following markets is applicable: (d) if, on that date, there was a State capital city market (other than the Sydney market) that recorded a higher volume of trading than the Sydney market in identical assets—that State capital city market; (2) For the purposes of this section, an asset is taken to have been listed on an Australian stock exchange on 30 June 1988 if, and only if, on that day the asset had the status of having been granted official quotation by a securities exchange within the meaning of the former Securities Industry Act 1980 or the law of a State or Territory corresponding to that former Act. (b) at any time during the period commencing at the time when the shares were acquired and ending at the end of 30 June 1988, the company paid an amount that was not a dividend to the entity in respect of the shares; (b) at any time during the period commencing at the time when the interest or unit was acquired and ending at the end of 30 June 1988, the trustee of the trust paid an amount to the entity in respect of the interest or unit, being: (i) in a case where the entity was exempt from tax for the year of income in which the payment was made—an amount that, if the entity had not been exempt from tax, would not have been the entity’s assessable income; or the cost base to the entity of the interest or unit as at 30 June 1988 is reduced by so much of the amount as is not attributable to a deduction allowed under former Division 10C or 10D of the Income Tax Assessment Act 1936. (1) Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (2) and (3) of this section apply if an entity exercises rights or options as mentioned in that section to acquire: (b) the greater of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (b) the lesser of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (4) The payment referred to in subsection (2) or (3) can include giving property. To the extent that the payment does, use the market value of the property in working out the amount of the payment. (1) A notice given under subsection 82AAT(1A) or (1CB) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑170 of the Income Tax Assessment Act 1997. (2) A notice given under subsection 82AAT(1C) or (1CD) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑180 of the Income Tax Assessment Act 1997. (1) A proportion of the ordinary income and statutory income of a continuously complying fixed interest ADF of an income year that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).  > Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the income year. > Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the income year. (4) A choice for the purposes of the definition of reckoning time in subsection (5) must be made on or before the date of lodgment of the income tax return of the ADF for the income year to which the choice relates, or before a later day allowed by the Commissioner. > continuously complying fixed interest ADF, in relation to an income year (the current year), means a fund that is a fixed interest complying ADF in relation to each of the following years: > current 25 May balance, in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time: (b) subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 September 1989 is to be added to the balance; (b) a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that day, made a deposit with the ADF that consisted wholly or partly of the roll‑over (as defined in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 as in force on that day) of an eligible termination payment as so defined, being an eligible termination payment that included a concessional component (as so defined). > fixed interest complying ADF, in relation to a year of income, means a complying ADF where both of the following conditions are satisfied: (a) not less than 90% of the amount that, apart from this section, would be the assessable income of the ADF of the income year (other than non‑arm’s length income or amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997) consists of any one or more of the following: (ii) any profit arising on the disposal, redemption, cancellation or maturity of a CGT asset referred to in paragraph 295‑85(3)(b) of the Income Tax Assessment Act 1997; (iii) an amount included in assessable income under Division 16E of Part III of the Income Tax Assessment Act 1936 (or would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply); (ii) virtual PST life insurance policies (as defined in the Income Tax Assessment Act 1997) issued by a life insurance company. > original 25 May balance, in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988. > reckoning time, in relation to an ADF in relation to an income year, means the beginning of the income year, or such other time during the income year as the ADF chooses in accordance with subsection (4). (6) This section does not apply to an ADF in relation to an income year unless the whole of the benefit that would accrue to the ADF from the application of this section in relation to the income year has been, or can reasonably expected to be, passed on to eligible depositors. An election made by the trustee of a complying superannuation fund under subsection 279(4) of the Income Tax Assessment Act 1936 that had effect for the income year of the fund in which 30 June 2007 occurs continues to have effect as if it had been made under section 295‑465 of the Income Tax Assessment Act 1997. Subdivisions 295‑I (no‑TFN contributions) and 295‑J (Tax offset for no‑TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006‑2007 income year ends on a day (the end day) after 1 July 2007 as if: (b) the entity’s no‑TFN contributions income for the entity’s 2007‑2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007‑2008 income year if the contributions concerned had been made in the entity’s 2007‑2008 income year. (2) Division 301 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section because you are a member of the fund in the same way as it would apply if the payments were superannuation member benefits paid to you from a complying superannuation fund. For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. Subdivision 301‑F of the Income Tax Assessment Act 1997 applies in relation to income years starting on or after 1 July 2007. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to the following in respect of an income year that starts on or before 1 July 2021: (b) the amendments of the Income Tax Assessment (1997 Act) Regulations 2021 made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023. (a) a superannuation benefit (the trigger benefit) was paid to a person in the 2020‑21 income year or an earlier income year; and (c) the trigger benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; and (2) The Commissioner cannot amend an assessment on the basis that a superannuation benefit paid to the person is a superannuation income stream benefit because of the amendments made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 if: (iii) the superannuation benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (a) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (b) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. (1) The Minister may, by legislative instrument, make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions) that: (a) relate to the amendments or repeals made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023; and (2) Without limiting subsection (1), rules made under this section before the end of the period of 12 months starting on the day that Schedule commences may provide that provisions of that Schedule, or any other Act or instrument, have effect with any modifications prescribed by the rules. Those provisions then have effect as if they were so modified. (2) Division 302 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section after another person’s death, because the other person was a member of that fund, in the same way as it would apply if the payments were superannuation death benefits paid to you from a complying superannuation fund. For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if: (b) just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. (2) For the purposes of Subdivision 82‑B of Division 82, Division 302 and section 303‑5 of the Income Tax Assessment Act 1997, the definition of death benefits dependant in section 302‑195 of that Act applies as if paragraphs (a) and (b) of the definition were replaced with the following paragraphs: (a) a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008 or a person who was formerly such a spouse; or (b) a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008, who is aged less than 18. (ii) a superannuation guarantee payment, a small superannuation account payment, an unclaimed money payment, a superannuation co‑contribution benefit payment or a superannuation annuity payment. (2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you at a time in the period: (i) a condition of release specified in item 107A or 207AA of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; or (ii) a condition of release specified in item 109AA of the table in Schedule 2 to the Retirement Savings Accounts Regulations 1997. (1) This section applies to a superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with section 292‑80B. (2) The superannuation benefit is not assessable income and is not exempt income to the extent that it does not exceed the amount mentioned in subsection (3). (3) The amount is the amount of excess non‑concessional contributions stated in the release authority in accordance with paragraph 292‑80A(3)(a), reduced (but not below zero) by the amount of any superannuation benefit that was not assessable income and not exempt income under a previous operation of subsection (2) in relation to the release authority. (4) The superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3). (a) you have an interest in a FIF (within the meaning of Part XI of the Income Tax Assessment Act 1936, as in force just before the commencement of item 37 of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010) (the paying fund); and (b) Subdivision 305‑B of the Income Tax Assessment Act 1997 applies in relation to the paying fund (see section 305‑55 of that Act); and (c) the paying fund transfers an amount to a complying superannuation fund in respect of you during the deduction year; and (d) you choose under section 305‑80 of the Income Tax Assessment Act 1997 that the amount, or part of the amount, is to be treated as assessable income of the complying superannuation fund; and (e) immediately before the transfer happens, there is a post‑FIF abolition surplus (within the meaning of the Income Tax Assessment Act 1936) for the paying fund in relation to you; and For the purposes of the definition of specified roll‑over amount in the Income Tax Assessment Act 1997, treat the taxable component of a directed termination payment (within the meaning of section 82‑10F) as the element untaxed in the fund of a superannuation benefit that is a roll‑over superannuation benefit. (1) This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007. > Note: This section also applies to an income stream replacing an earlier one because of an involuntary roll‑over (see section 307‑127). (2) Despite subsection 307‑125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows: (a) first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007); (b) next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits. The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit. (3) Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened: (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day; (ba) the holder of the superannuation interest is aged 60 or above on 1 July 2007, if none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day. (a) treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and (b) work out the tax free component of the superannuation interest for the purposes of section 307‑125 of the Income Tax Assessment Act 1997 under subsections (6) and (6A). (i) an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and (ii) the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time; (b) next, work out the unused undeducted purchase price (within the meaning of paragraph (a) of the definition of that term in subsection 27A(1) of the Income Tax Assessment Act 1936 just before the commencement of this section, and disregarding paragraphs (b) and (c) of that definition) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007; (c) next, work out the pre‑July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this section) of the eligible termination payment. (a) at least one superannuation income stream benefit was paid from the superannuation income stream before 1 July 1994; or (b) section 27AAAA of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007) applied to the superannuation income stream just before 1 July 2007; (7) For the purposes of paragraph (6)(c), disregard the value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment. (8) If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as: (b) if 1 or more other events mentioned in subsection (3) happened before the commutation—the time just before the earliest of those events happens. (a) references in that section to the later income stream (in relation to a time, or event happening, before the payment of that involuntary roll‑over superannuation benefit) include references to the earlier income stream; and (b) references in that section to the superannuation interest supporting the later income stream (in relation to a time, or event happening, before the payment of that benefit) include references to the earlier interest. (1) This section applies for the purposes of working out the amount of your total superannuation balance just before 1 July 2017. (2) The transfer balance mentioned in paragraph 307‑230(1)(b) of the Income Tax Assessment Act 1997 just before 1 July 2017 is taken to be equal to: (a) the sum of the transfer balance credits (if any) in your transfer balance account just after the start of 1 July 2017; less (b) the sum of the transfer balance debits (if any) arising in your transfer balance account on 1 July 2017 under item 4 of the table in subsection 294‑80(1) of that Act (about payment splits). (1) Section 307‑231 of the Income Tax Assessment Act 1997 applies in relation to borrowings that arise under contracts entered into on or after 1 July 2018. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2018 is treated as if it arose under a contract entered into before 1 July 2018 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) treat a deduction made under former section 279 of the Income Tax Assessment Act 1936 as having been made under section 295‑465 of the Income Tax Assessment Act 1997 instead; and (b) treat a deduction made under former section 279B of the Income Tax Assessment Act 1936 as having been made under section 295‑470 of the Income Tax Assessment Act 1997 instead. If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007‑2008 income year is, despite subsection 307‑345(1), the total of: (b) the amount by which $140,000 exceeds the upper limit for the 2006‑2007 income year (worked out under section 159SG of that Act). Division 316 of the Income Tax Assessment Act 1997 applies in relation to demutualisations occurring on or after 1 July 2008. If: (a) any assets held by the benefit funds of a life insurance company that is a friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a complying superannuation fund; and (b) the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer; the transfer is disregarded for any purposes of the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936. (1) In working out the amount that a life insurance company can deduct, in respect of life insurance policies that are disability policies (other than continuous disability policies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income. (2) In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection (1) applies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company’s liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320‑85(4) of that Act. If: (2) If the life insurance company wishes to include a part of an approved asset in its virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑87(2) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society establishes a virtual PST in the 2000‑01 income year, the calculation of the transfer values of the company’s virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year. (1) Subsection (3) applies for the purposes of subparagraph (b)(i) of the definition of virtual PST life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 259 of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007. (2) Subsection (3) also applies for the purposes of subparagraph (b)(i) of the definition of complying superannuation/FHSA life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 47 of Schedule 7 to the First Home Saver Accounts (Consequential Amendments) Act 2008. (3) Treat an annuity as having been purchased out of a superannuation lump sum or an employment termination payment, if the annuity was purchased: (b) out of an eligible termination payment (within the meaning of the Income Tax Assessment Act 1997, as in force just before the commencement mentioned in subsection (1) of this section). (2) If the life insurance company wishes to include a part of an approved asset in its segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (a) a life insurance company had a liability before 1 July 2000 under a life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and (c) there is a transfer of the company’s assets to the segregated exempt assets to meet that liability or that part of the liability; (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑105(1) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320‑225 of the Income Tax Assessment Act 1997 in the 2000‑01 income year, the calculation of the transfer values of the company’s segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year. Section 322‑25 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Part VC of the Insurance Act 1973 after 17 October 2008. 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you > new Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force after the commencement of this section. > old Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. > STS taxpayer means an STS taxpayer within the meaning of Division 328 of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. #### 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years (1) This section applies for the purpose of working out whether you are a small business entity (other than because of subsection 328‑110(4) of the Income Tax Assessment Act 1997) for the 2007‑08 or 2008‑09 income year. (2) You work out your aggregated turnover for the 2005‑06 or 2006‑07 income year as if the amendments made by Schedule 1 to the Tax Laws Amendment (Small Business) Act 2007 had been in force in relation to that year. (a) your aggregated turnover for the 2005‑06 income year (worked out in accordance with subsection (2)) is $2 million or more; but (b) your STS group turnover for that year (worked out under Subdivision 328‑F of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section) is less than $2 million. (2) The following provisions apply as if you are a small business entity for the income year in which you are winding up the business: #### 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you (1) For the purpose of working out whether you are a small business entity for the 2007‑08, 2008‑09, 2009‑10 or 2010‑11 income year (each a relevant income year) for the purposes of a provision to which subsection (3) applies: (2) An entity (the first entity) controls a discretionary trust for a relevant income year if, for any of the 4 income years (a previous income year) before that year: (a) if the previous income year is before the 2007‑08 income year—the trustee of the trust made a distribution of $100,000 or more to the first entity, any of its affiliates, or the first entity and any of its affiliates; or (i) the trustee of the trust paid to, or applied for the benefit of, the first entity, any of the first entity’s affiliates, or the first entity and any of its affiliates, any of the income or capital of the trust; and (ii) the percentage (the control percentage) of the income or capital paid or applied is at least 40% of the total amount of income or capital paid or applied by the trustee for that year. (1) This section sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (2) This section also sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (3) Any ordinary income that, apart from paragraph 328‑105(1)(a) of the Income Tax Assessment Act 1997 (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have derived before the changeover year (while you were using the STS accounting method) and you have not included in your assessable income because you have not received it is included in your assessable income for the changeover year. (4) Any general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, that, apart from paragraph 328‑105(1)(b) of that Act (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have incurred before the changeover year (while you were using the STS accounting method) and that you have not deducted because you have not paid them can be deducted for the changeover year. (b) for any later income year for which you are a small business entity but only if you used the STS accounting method for the income year before that later year. > Note: Example: You are a small business entity for the 2007‑08 and 2008‑09 income years and you continue to use the STS accounting method for those years. You are not a small business entity for the 2009‑10 income year so you cannot continue to use the STS accounting method for that year. Because you cannot use the STS accounting method for the 2009‑10 income year, you will not be able to use it again for a later income year even if you are a small business entity for that later year. In sections 328‑115 and 328‑120, STS accounting method means the accounting method that was required by the Income Tax Assessment Act 1997 to be used by STS taxpayers for the 2004‑05 income year. (b) you made a choice under subsection 328‑175(3) of old Subdivision 328‑D in relation to a depreciating asset you use to carry on a primary production business and for which you could deduct amounts under Subdivision 40‑F or 40‑G of the Income Tax Assessment Act 1997. (2) In determining whether you can choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997 in an increased access year, disregard subsection 328‑175(10) of that Act. (3) In applying paragraph 328‑175(10)(b) of that Act for the purpose of determining whether you can choose to use that Subdivision in any income year after the increased access years, disregard: (4) Paragraph 328‑180(1)(b) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that paragraph to $1,000: (i) first used the asset, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (i) first used the asset, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (i) first used the asset, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, on or after 1 July 2023 and on or before 30 June 2026. (a) a reference in that paragraph to the end of the income year in which you start to use the asset, or have it installed ready for use, for a taxable purpose were a reference to the earlier of: if: (i) first used the asset, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021. (5) Paragraph 328‑180(2)(a) or (3)(a) of the Income Tax Assessment Act 1997 applies to an amount included in the second element of the cost of an asset as if a reference in that paragraph to $1,000: (5A) For the purposes of determining whether, under subsection 328‑180(2) of the Income Tax Assessment Act 1997, you can deduct, for an income year (the current year), the taxable purpose proportion of an amount included in the second element of the cost of an asset, disregard paragraph (b) of that subsection if: (2) For the purposes of determining whether subsection 328‑180(1) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (b) of that subsection (which sets a limit of $1,000 on the cost of the asset) if, in the period beginning at the 2020 budget time and ending on 30 June 2023, you: (3) For the purposes of determining whether subsection 328‑180(2) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (a) of that subsection (which sets a limit of $1,000 on the amount) if the amount is included in the second element of the cost of the asset at any time in the period beginning at the 2020 budget time and ending on 30 June 2023. (4) In applying paragraph 328‑180(3)(a) of the Income Tax Assessment Act 1997 to an asset, disregard an amount included in the second element of the cost of the asset if the amount is deducted under subsection 328‑180(2) of that Act, as modified by subsection (3) of this section. (5) Section 328‑210 of the Income Tax Assessment Act 1997 applies as if the words “less than $1,000 but” in subsection (1) were disregarded, in relation to a deduction for an income year that ends: Subsection 328‑190(2) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that subsection to 15% were a reference to 57.5% if you are covered by section 40‑125 for the asset (which is about backing business investment). (1) A depreciating asset of yours that had been allocated to your general STS pool is treated as being allocated to your general small business pool. (2) A depreciating asset of yours that had been allocated to your long life STS pool is treated as being allocated to your long life small business pool. (3) If you made a choice, under subsection 328‑185(5) of old Subdivision 328‑D, not to have a depreciating asset allocated to your long life STS pool, the choice has effect for the purposes of subsection 328‑185(5) of new Subdivision 328‑D. (1) This section applies if a depreciating asset of yours is treated as being allocated to your general small business pool or long life small business pool under section 328‑185. (2) The opening pool balance of your general small business pool or long life small business pool for the 2007‑08 income year is taken to be the closing pool balance of your general STS pool or long life STS pool, as the case requires, for the 2006‑07 income year, reduced or increased by any adjustment required under section 328‑225 of new Subdivision 328‑D (about change in the business use of an asset). (a) you were not an STS taxpayer for the 2006‑07 income year (because you stopped being an STS taxpayer before that time); but (b) you are a small business entity for the 2007‑08 income year or a later income year and you choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets for that income year; the opening pool balance of your general small business pool or long life small business pool includes the sum of the taxable purpose proportions of the adjustable values of depreciating assets allocated to the pool under subsection 328‑185(3) of new Subdivision 328‑D for that year. (1) This section applies for the purposes of applying Subdivision 328‑D of the Income Tax Assessment Act 1997 for the 2012‑13 income year and later income years. (2) A depreciating asset that had been allocated to your long life small business pool is treated as being allocated to your general small business pool. (a) the closing pool balance of your general small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under section 328‑225 of that Act; and (b) the closing pool balance of your long life small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under that section. (1) This section applies if you chose to stop being an STS taxpayer for the 2005‑06 income year or the 2006‑07 income year. (2) You cannot choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets until at least 5 years after the income year for which you chose to stop being an STS taxpayer. > Note: Subdivision 328‑D of the Income Tax Assessment Act 1997 continues to apply to depreciating assets that have been allocated to your small business pools even if you are not a small business entity, or do not choose to use that Subdivision, for an income year: see section 328‑220 of that Subdivision. (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct 20% of particular expenditure for your 2023‑24 income year if: (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (d) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑450 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (6) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (ii) if the provider is a registered body of a kind listed in paragraph (2)(b), (c) or (d)—the training is within the provider’s scope of registration for that kind of registered body; and (d) each enrolment, or arrangement, for the provision of the training is made or entered into at or after 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022; and > Note: Paragraphs (b) and (c) mean this section will not apply to expenditure for on‑the‑job training or training provided by you in house. (a) a registered higher education provider (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); (b) a NVR registered training organisation (within the meaning of the National Vocational Education and Training Regulator Act 2011); (c) a registered education and training organisation (within the meaning of the Education and Training Reform Act 2006 (Vic.)); (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct for your 2023‑24 income year an amount that is equal to the sum of: (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (3) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑460 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (4) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (b) you incur the expenditure in the period starting at 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022 and ending at the end of: (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (4) For the purposes of paragraphs (1)(c) and (2)(c), in working out whether you can deduct an amount of expenditure on a depreciating asset, assume that: (b) throughout that effective life, you will use the asset for a taxable purpose to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose. (a) 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑470(1) or (3) applies in relation to the income year; and > Note: The deduction relates to the period of 1 July 2023 to 30 June 2024. An entity may have deducted an amount under paragraph (a) for a previous income year if the entity has a substituted accounting period. (2) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑470 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (3) Sections 8‑10, 40‑215 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (c) you start to use the asset, or have it installed ready for use, for any purpose after 30 June 2023 but before 1 July 2024; and (d) you start to use the asset, or have it installed ready for use, for a taxable purpose at a time (the start time) that is: (e) you are a small business entity, or an entity covered by subsection (4), for the income year that includes the start time; and (h) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) a new reasonably comparable depreciating asset that uses a fossil fuel (other than a use of which that is merely incidental) is available in the market at the start time; (ii) if the asset is being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than the other asset; (iii) if the asset is not being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than a new reasonably comparable depreciating asset that is available in the market at the start time; or (i) a depreciating asset (other than an asset excluded under subsection (6)) that uses electricity, or energy that is generated from a renewable source, to be more energy efficient; (iv) the use of electricity, or energy that is generated from a renewable source, by another depreciating asset to be monitored. (a) the amount is included in the second element of a depreciating asset’s cost under paragraph 40‑190(2)(a) of the Income Tax Assessment Act 1997; and (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (d) you are a small business entity, or an entity covered by subsection (4), for the income year in which the expenditure is incurred; and (i) if the asset could use a fossil fuel (other than a use of which that is merely incidental)—the asset to only use electricity, or energy that is generated from a renewable source; (ii) if the asset uses electricity, or energy that is generated from a renewable source—the asset to be more energy efficient; (g) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) For the purposes of paragraph (1)(b) or (3)(b), in working out whether you can deduct an amount of expenditure assume that: (i) for the purposes of paragraph (1)(b)—to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose; or (ii) for the purposes of paragraph (3)(b)—to the same extent as you use it for a taxable purpose in the income year in which the expenditure is incurred. (b) expenditure (other than expenditure referred to in subparagraph (3)(e)(i)) on an asset that can use a fossil fuel (other than a use of which that is merely incidental); (c) an asset that solely or predominantly generates electricity from a renewable source (for example, photovoltaic cells) or expenditure on such an asset; (d) an asset, or expenditure, being capital works for which you can deduct an amount under Division 43 of the Income Tax Assessment Act 1997; > Note: Subsections (1) and (3) also do not apply to an item of trading stock because such an asset is not a depreciating asset: see section 40‑30 of the Income Tax Assessment Act 1997. A reference in each of the following provisions of the Income Tax Assessment Act 1997 to a registration under section 27A of the Industry Research and Development Act 1986 includes a reference to a registration under former section 39J of that Act: (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) the R&D entity cannot deduct an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from: (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D entity could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:22pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the R&D entity is taken to be able to deduct under subsection 355‑315(2) of the new Act that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the R&D entity’s assessable income for the event year under subsection 355‑315(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 for the asset, the R&D entity is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑446 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the R&D entity is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑465 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: Section 355‑315 of the new Act would otherwise apply for the event in a case where the R&D entity had new law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by an R&D partnership; and (i) the partner can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the partner chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D partnership could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the partner is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:21.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D entity</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D partnership</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the partner is taken to be able to deduct under subsection 355‑525(2) of the new Act the partner’s proportion of that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the partner’s assessable income for the event year under subsection 355‑525(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partner’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if one or more partners (including the partner) in the R&D partnership is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset, the partner is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑448 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the partner is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑467 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s deductions under section 355‑520 of the new Act mentioned in subsection (4A) of this section. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the partner for the event, do so apply to the partner for the event. > Note 1: Section 355‑525 of the new Act would otherwise apply for the event in a case where the partner had new law deductions. Item 7 of the table in subsection 57‑110(2) in Schedule 2D to the Income Tax Assessment Act 1936 applies as if the deduction rules set out in the final column of that item also included former sections 73BA and 73BH of the Income Tax Assessment Act 1936. For the purposes of step 1 of the method statement in subsection 355‑415(2) of the Income Tax Assessment Act 1997, also disregard amounts that have already been taken into account under former subsection 73B(14AA) of the Income Tax Assessment Act 1936 for the R&D entity, the grouped entity and the R&D activities for an earlier income year. (1) This section applies if, apart from former paragraph 73B(10)(a) of the Income Tax Assessment Act 1936, an eligible company could deduct advance R and D expenditure in one or more income years commencing on or after 1 July 2011. > Note: That deduction would be under former section 73B of that Act as that former section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (a) apart from Subdivision H (prepaid expenditure) of Division 3 of Part III of the Income Tax Assessment Act 1936, an eligible company can deduct an amount under former section 73B, 73BA, 73BH, 73QA, 73QB or 73Y of that Act for an income year commencing before 1 July 2011; and (c) apart from former paragraph 73B(10)(a) of that Act, the eligible company could deduct an amount, as a result of that application of that Subdivision, for an income year commencing on or after 1 July 2011. > Note: That deduction would be under that Act as it applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (3) Former paragraph 73B(10)(a) of that Act is taken to apply to those income years commencing on or after 1 July 2011 as if the reference in that former paragraph to section 39J of the Industry Research and Development Act 1986 were a reference to section 27A of that Act. (4) An expression used in this section that is also used in former section 73B of the Income Tax Assessment Act 1936 has the same meaning in this section as it has in that former section. This Subdivision applies to core technology (within the meaning of former section 73B of the Income Tax Assessment Act 1936) if: (a) you incurred core technology expenditure (within the meaning of that former section) in an income year commencing before 1 July 2011 in relation to the core technology under one or more contracts entered into at or after the time referred to in former subsection 73B(12) of that Act; and (b) that expenditure (the undeducted expenditure) cannot be deducted for the last income year commencing before 1 July 2011. (1) This section applies for the purposes of Division 40 of the Income Tax Assessment Act 1997, other than sections 40‑292 and 40‑293 of that Act, if the core technology (the asset) is a depreciating asset. (2) Disregard this section, including its effect on the amount you can deduct under section 40‑25 of that Act for the asset, for the purposes of working out: (3) The asset’s opening adjustable value for the first income year that commences on or after 1 July 2011 (the first new income year) is equal to the amount of the undeducted expenditure. (4) Subsection 40‑75(2) of the Income Tax Assessment Act 1997 applies to the asset as if the first new income year were a change year (within the meaning of that subsection). If the core technology is not a depreciating asset, you can deduct the undeducted expenditure in equal proportions over a period of 5 income years starting in the first income year commencing on or after 1 July 2011. To work out the film component (if any) of your tax loss for the 1997‑98 income year or a later income year, apply former section 375‑805 of the Income Tax Assessment Act 1997. If you incurred a film loss for the purposes of former section 79F (Film losses of 1989‑90 to 1996‑97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989‑90 to 1996‑97 income years, that film loss is the film component of your tax loss for that income year. (1) To work out your film loss (if any) for the purposes of the Income Tax Assessment Act 1997 for the 1989‑90 or a later income year, apply former section 375‑810 of that Act. (2) You can deduct in the 1997‑98 or a later income year your film loss for any of the 1989‑90 to 1996‑97 income years only to the extent that it has not already been deducted. (1) Division 392 of the Income Tax Assessment Act 1997 applies to assessments for the 1998‑99 income year and later income years. (a) it had applied to your assessment for each income year before the 1998‑99 income year for which Division 16 of Part III of the Income Tax Assessment Act 1936 applied in relation to your income; and (b) you had carried on a primary production business during each income year before the 1998‑99 income year when you carried on a business of primary production; and (c) for each income year before the 1998‑99 income year you had a basic taxable income equal to your taxable income for the income year for the purposes of Division 16 of Part III of the Income Tax Assessment Act 1936. > Note: Section 149A of the Income Tax Assessment Act 1936 identifies what your taxable income for an income year is for the purposes of Division 16 of Part III of that Act. Division 392 of the Income Tax Assessment Act 1997 does not apply to your assessment for the 1998‑99 income year or a later income year if you made an election under section 158A (Election that Division not apply) of the Income Tax Assessment Act 1936 relating to an income year before the 1998‑99 income year. 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 A reference in Division 393 of the Income Tax Assessment Act 1997 to a deduction under section 393‑5 of that Act for making a farm management deposit is taken to include a reference to a deduction under section 393‑10 in Schedule 2G to the Income Tax Assessment Act 1936, as in force just before the commencement of this section, if the deposit was made before the 2010‑11 income year. #### 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 (b) the deposit was made with an FMD provider as a result of a request to which section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, applied; the unrecouped FMD deduction in respect of the deposit at that time is equal to the amount of the unrecouped deduction (within the meaning of the former subsection 159GA(3) of the Income Tax Assessment Act 1936) in respect of the deposit immediately before it ceased to be a deposit under the Loan (Income Equalization Deposits) Act 1976. > Note: This means that the unrecouped deduction relating to the deposit under the Loan (Income Equalization Deposits) Act 1976 continues to apply (by becoming an unrecouped FMD deduction) when the deposit is transferred to an FMD provider as a farm management deposit. The Loan (Income Equalization Deposits) Act 1976 was repealed on 22 February 2005. If a beneficiary of a trust was covered by paragraph (c) of the definition of primary producer in section 393‑25 in Schedule 2G to the Income Tax Assessment Act 1936 in the 2009‑10 income year, treat subsection 393‑25(3) of the Income Tax Assessment Act 1997 as having applied to the beneficiary for the purpose of determining the maximum number of choices that the trustee may make under subsection 393‑27(2) of that Act for the 2010‑11 income year. (a) a farm management deposit of an owner was unclaimed moneys for the purposes of section 69 of the Banking Act 1959; and (2) For the purpose of subsection 393‑10(1) of the Income Tax Assessment Act, treat the repaid unclaimed moneys as a repayment of the deposit of the owner. (3) To avoid doubt, the payment of unclaimed moneys to the Commonwealth under section 69 of the Banking Act 1959 is not a repayment of the deposit of the owner for the purposes of Division 393 of the Income Tax Assessment Act 1997. 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 #### 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 If a farm management deposit was made with an FMD provider as a result of a request under section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, then: (a) subsections 393‑40(1) to (4) of the Income Tax Assessment Act 1997 apply as if the day the deposit was made was the day on which the deposit was originally made under the Loan (Income Equalization Deposits) Act 1976; and (1) A copyright collecting society to which section 51‑43 of the Income Tax Assessment Act 1997 applies, may elect that, from 1 July 2004, the section apply to all ordinary income, and statutory income, collected or derived by the society on or after 1 July 2004. Division 420 of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division. Subdivision 615‑C of the Income Tax Assessment Act 1997 applies to you with the modifications set out in this Subdivision if you chose to obtain a roll‑over involving \*shares or units that: (b) were your trading stock, or revenue assets, at the time immediately before that disposal, redemption or cancellation. (1) Disregard subparagraph 615‑45(a)(ii), and paragraph 615‑45(b), of the Income Tax Assessment Act 1997 if the roll‑over relates to \*shares that were disposed of, redeemed or cancelled. (2) For each of the \*shares in the interposed company that you acquired in return for those of your shares or units in the original entity that were your \*trading stock at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  (2) For the purpose of calculating any profit or loss on a future disposal, cessation of ownership, or other realisation of a \*share in the interposed company that you acquired in return for those of your shares or units in the original entity that were \*revenue assets at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  Subdivision 620‑A of the Income Tax Assessment Act 1997 applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. (1) Part 3‑90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Act (No. 1) 2002 and amended by: (2) Section 713‑50 of the Income Tax Assessment Act 1997 (about factors to consider in determining destination of distribution by non‑fixed trust) applies for the purposes of this Part in the same way as it applies for the purposes of Part 3‑90 of that Act. ### Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly‑owned subsidiary of the entity (the future head company) that became the head company of the group; or (ii) at some time during that period, the entity was a wholly‑owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (ii) it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (1) If a group is a transitional group, its head company may, subject to subsection (3), choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (3) If the choice is to be made after the end of the period mentioned in paragraph (2)(a) and before the end of the day mentioned in paragraph (2)(b), it cannot be made unless each entity in relation to which the conditions in subsection (5) are satisfied has agreed to it being made. (a) the entity (the leaving entity) ceased to be a subsidiary member of the group before the choice was made (in a subsection (3) case) or before the revocation took place (in a subsection (4) case); and (b) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; and (c) the asset had become that of the head company because that section applied when a chosen transitional entity (whether or not the same entity as the leaving entity) became a subsidiary member. Section 716‑855 applies for the purposes of this Division in the same way as that section applies for the purposes of Part 3‑90 of the Income Tax Assessment Act 1997. is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705‑B of that Act and with this Division. 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity Section 701‑10 (cost to head company of assets of joining entity) and subsection 701‑35(4) (setting value of trading stock at tax‑neutral amount) of the Income Tax Assessment Act 1997 do not apply to the assets of a chosen transitional entity. > Note: The fact that the head company inherits the entity’s history under section 701‑5 of that Act when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time. #### 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities (2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non‑chosen subsidiary) is worked out in a special way. (b) for each sub‑group (see subsection (6)) that exists in relation to the non‑chosen subsidiary—the sub‑group’s notional allocable cost amount (see subsection(5)) for the non‑chosen subsidiary. (4) The head company adjusted allocable amount for the non‑chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if; (b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of head company’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub‑group in relation to the non‑chosen subsidiary. (5) For each sub‑group that exists in relation to the non‑chosen subsidiary, there is a sub‑group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non‑chosen subsidiary if: (a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non‑chosen subsidiary and the entities comprising the sub‑group; and (c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub‑group membership interests (see subsection (6)) in relation to the sub‑group, and any such entity held those membership interests during the period when it actually held them; and (d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of chosen transitional entity’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub‑group. (6) If a chosen transitional entity holds membership interests in a non‑chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non‑chosen subsidiary: (a) the chosen transitional entity and each interposed non‑chosen subsidiary comprise a sub‑group in relation to the non‑chosen subsidiary (unless the non‑chosen subsidiary is included in a sub‑group in relation to another non‑chosen subsidiary); and (i) the membership interests that the chosen transitional entity holds directly in the non‑chosen subsidiary or in any of the interposed non‑chosen subsidiaries; (ii) the membership interests that each interposed non‑chosen subsidiary holds directly in the non‑chosen subsidiary or in any of the other interposed non‑chosen subsidiaries. #### 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities If any provision of the Income Tax Assessment Act 1997 would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply. > Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred. (1) This section has effect for the purposes of applying section 705‑70 (step 2 of allocable cost amount) of the Income Tax Assessment Act 1997 in relation to a transitional entity. (2) In spite of subsection 705‑70(1A) of that Act, if the amount of an accounting liability of the transitional entity would be different when it becomes an accounting liability of the transitional group, that difference is not taken into account in working out the amount of the liability. #### 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different (a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset (the roll‑over asset) for which there was: (ii) roll‑over relief under section 40‑340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and (i) became an asset of the head company when the transitional group came into existence because subsection 701‑1(1) (the single entity rule) of that Act applies; or differs at that time from what it would have been if the act, transaction or event that gave rise to the CGT event had not occurred in relation to the roll‑over asset; then the provisions mentioned in subsection (2) apply as if the act, transaction or event had not occurred in relation to the roll‑over asset. (a) the act, transaction or event mentioned in subsection (1) happened before a demerger and in connection with the demerger; and (b) before the transitional group came into existence, at least one of the following entities ceased to be a member of the demerger group because of the demerger: (i) the originating company in relation to the roll‑over, or the transferor in relation to the roll‑over relief, was a foreign resident; and (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as a transitional foreign‑held subsidiary of the group. #### 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets (1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied. (2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset. (a) the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and (b) former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset. (4) The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group. (6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses. #### 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets (b) just before the transitional group came into existence, the entity that became the head company held a pre‑CGT asset; and (d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre‑CGT asset and is held by the head company only because the entity is taken by subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company. (2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence. #### 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity (1) This section provides for an addition to the step 1 amount for working out under section 711‑20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity) that ceases to be a subsidiary member of the transitional group at a time (the leaving time), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701‑1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount for paragraph</span><span> </span><span>(2)(c)</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">If, because of the circumstances described in paragraphs</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(a) and (b):</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">The amount is:</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:180.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following provisions applied to the entity:</span></p><p class="Tablea"><span>(a) former section</span><span> </span><span>61A of the </span><span style="font-style:italic">Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(b) former Subdivision</span><span> </span><span>57</span><span>‑</span><span>I in Schedule</span><span> </span><span>2D to the</span><span style="font-style:italic"> Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(c) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(4) of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td><td style="width:148.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the amount treated as being the cost of the asset under that provision; and</span></p><p class="Tablea"><span>(b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>2</span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following subsections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span><span> applied to the entity:</span></p><p class="Tablea"><span>(a) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(5);</span></p><p class="Tablea"><span>(b) 58</span><span>‑</span><span>70(3)</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The amount treated as being the cost, or the first element of the cost, of the asset under that subsection</span></p></td></tr></tbody></table> ``` (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997, as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="4" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amounts and provisions for different dates of acquisition</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Date of the acquisition</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Amount</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Provision of Division</span><span style="font-weight:bold"> </span><span style="font-weight:bold">58 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> applying to the acquisition and the working out of the amount</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:76.7pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>160</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>220</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>After 30</span><span> </span><span>June 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>First element of the cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subsection</span><span> </span><span>58</span><span>‑</span><span>70(5)</span></p></td></tr></tbody></table> ``` > Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. > Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and ### Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: #### 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70‑45 to 70‑70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420‑51 to 420‑58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (a) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority‑owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority‑owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority‑owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority‑owned entity became a subsidiary member of the group, there was roll‑over relief under section 40‑340 of the Income Tax Assessment Act 1997. (a) while the asset is, because subsection 701‑1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, its tax cost setting amount is taken to be equal to the continuing majority‑owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711‑30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997. (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset becomes that of an entity (a new asset holder) other than the head company because subsection 701‑1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder) acquiring some or all of the membership interests in the new asset holder; and (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset is acquired by another entity (a new asset holder) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll‑over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value asset just before the acquisition; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 #### 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 (b) members of the consolidated group or the MEC group mentioned in subsection 104‑500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701‑1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701‑1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (3) If this section applies, neither subsection 104‑500(4) nor subsection 104‑500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year. ### Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C‑B); and (b) modifies certain rules in Part 3‑90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C‑C). > Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719‑2 and 719‑10 of this Act). 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership #### 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(ii) of that Act (see subsection 719‑2(3) of this Act). (b) a trust (a non‑resident trust) that does not meet the requirements in any item of the table in section 703‑25 of the Income Tax Assessment Act 1997. (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non‑resident company or a non‑resident trust; or Test entity must be a subsidiary member on assumption that non‑resident companies and non‑resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non‑resident company or non‑resident trust were a subsidiary member of the group. (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv). #### 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(iii) of that Act (see subsection 719‑2(3) of this Act). (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C‑10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3). If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C‑10 are met; and (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (ii) an entity that is a transitional foreign‑held indirect subsidiary of the group because of another application of this paragraph; Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign‑held indirect subsidiary would need to have satisfied the set of requirements in either section 701C‑10 or 701C‑15 (1) This Subdivision applies if an entity (the transitional foreign‑held joining entity) that is a transitional foreign‑held subsidiary or a transitional foreign‑held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time) the group comes into existence. (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign‑held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign‑held indirect subsidiary that becomes a subsidiary member at that time takes account of this. (a) section 701‑10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); apply, for the purposes of setting the tax cost of an asset of the transitional foreign‑held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign‑held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. > Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign‑held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign‑held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign‑held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign‑held subsidiary and the other entity. > Note 2: If the transitional foreign‑held joining entity is a transitional foreign‑held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705‑A of the Income Tax Assessment Act 1997, in its application in accordance with Subdivision 705‑B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company. Subsection 701‑35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax‑neutral amount) does not apply to the assets of the transitional foreign‑held joining entity if it is a transitional foreign‑held subsidiary. Section 701‑15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: (a) this section applies to each membership interest in the transitional foreign‑held subsidiary that is held by an entity (an eligible non‑resident) of a kind mentioned in subparagraph 701C‑20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign‑held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701‑1(2) of the Income Tax Assessment Act 1997 applies to the eligible non‑resident in the same way as it applies to the head company. Section 711‑5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: > Note: If the leaving entity is a transitional foreign‑held subsidiary (within the meaning of section 701C‑20 of the Income Tax (Transitional Provisions) Act 1997), this Division will, in accordance with subsection 701‑15(4) of this Act (see section 701C‑40 of the first‑mentioned Act), apply to membership interests that an eligible non‑resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity. (1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707‑C of the Income Tax Assessment Act 1997. (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period. (1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if: (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (d) the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997. (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: (1) The head company of a consolidated group may make a choice in the approved form to apply section 701D‑10 to another entity. (2) However, the head company cannot make that choice if subsection 701D‑10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (a) an asset of the head company because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701‑55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40‑77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40‑77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40‑285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount. (b) after the asset became an asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). > Note: The final entity will be different from the head company if an entity (the leaving entity) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40‑285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. > Note: The final entity will be entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701‑5 (the entry history rule) of that Act and perhaps also section 701‑40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity) became a subsidiary member of the group; and It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). > Note: In some cases, section 705‑47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40‑285(3) of this Act. If: (b) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and subsection 40‑285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701‑10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997. > Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997. (1) For the purposes of Part 3‑90 of the Income Tax Assessment Act 1997, this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960‑G of that Act whether the interest or right is a membership interest of the entity in the other entity. > Note: Under Subdivision 960‑G of the Income Tax Assessment Act 1997, a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001) apply to transactions in relation to the interest or right at the relevant time. Despite the amendments of section 703‑35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) If an entity (the joining entity) to which section 40‑75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time), this Subdivision applies in relation to: (ii) became assets of the head company of the group at the joining time because of section 701‑1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure. (1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). (2) If the joining entity could not deduct an amount under Subdivision 40‑B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701‑55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40‑35, 40‑37, 40‑40 or 40‑43 treated the joining entity as holding a notional asset. > Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705‑30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. (a) deductions under former Subdivision 330‑A, 330‑C or 330‑H of the Income Tax Assessment Act 1997, or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated an entity as holding because of the expenditure. (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); > Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40‑75(4) of this Act, but may have been reset since under Subdivision 40‑B of the Income Tax Assessment Act 1997. > Note 2: The effective life of a notional asset is specified by whichever one of sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act is relevant to the notional asset. (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (9) Section 705‑55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705‑45 of that Act. > Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705‑40 of the Income Tax Assessment Act 1997. (a) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701‑5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. > Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705‑305(3). (ii) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707‑A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member. 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value #### 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707‑320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor) other than the real loss‑maker mentioned in subsection 707‑315(1) of that Act for the bundle; and (b) both the real loss‑maker and the value donor became members of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (ca) neither the real loss‑maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (ii) a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (ii) section 713‑540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (2) It must have been possible for the real loss‑maker to have transferred the loss to the value donor under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss‑maker at the initial transfer time the amount worked out using the formula:  > Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707‑327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss‑maker to the transferee. > total of real loss‑maker’s non‑foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss‑makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) included in a bundle of losses: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. #### 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value (1) This section affects the calculation of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707‑325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936, in the bundle). > Note: This section does not affect the calculation of the real loss‑maker’s modified market value for other purposes (such as the real loss‑maker being a value donor for the purposes of another application of section 707‑325 of this Act). (3) One condition is that the event was an injection of capital directly into the real loss‑maker by the value donor mentioned in section 707‑325 of this Act. (c) that would have caused subsection 707‑325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss‑maker’s modified market value (even if no other events described in subsection 707‑325(4) of that Act had occurred), apart from this section. (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss‑maker (whether or not the event also involved either the value donor or the real loss‑maker); or (1) This section has effect for the purposes of working out under Subdivision 707‑C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707‑325, as if there were added to the modified market value of the real loss‑maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (c) the loss is not a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707‑A of that Act at the initial transfer time had the company: > Note: This section has effect even if the amount added to the real loss‑maker’s modified market value under section 707‑325 is nil because the value donor’s modified market value is nil. (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707‑325, as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (4) If the transferee mentioned in subsection 707‑325(1) chooses, sections 707‑310, 707‑335 (except paragraph 707‑335(2)(a)) and 707‑340 of the Income Tax Assessment Act 1997 (and subsections 707‑315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: > Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707‑325(1)(d) and (e) and subsection 707‑325(2) in an application of section 707‑325 separate from the application of that section mentioned in paragraph (1)(a) of this section. > Note: This means that a loss that provided a basis for section 707‑325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. (b) in connection with the requirement that it must have been possible for a company (the notional transferor) to transfer to another company (the notional transferee) for an income year a loss under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997. (b) ends immediately after the initial transfer time mentioned in subsection 707‑320(1) of the Income Tax Assessment Act 1997. > Note: For the purposes of identifying the trial year using the definition in section 707‑120 of the Income Tax Assessment Act 1997, the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time. (1) Subsection (3) of this section affects the calculation, under section 707‑325 of the Income Tax Assessment Act 1997 and section 707‑325 of this Act, of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (the formation time) the group became a consolidated group; and (b) the provisions described in subsection 707‑327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707‑327(1)(b) and (c) of this Act as if the bundle included the loss; and (d) subsection 707‑325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707‑325(1) of this Act chooses that this section apply in relation to the real loss‑maker. (2) Section 707‑325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. (3) Disregard for the purposes of subsection 707‑325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707‑325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or > Note: Disregarding such an event could have a direct or indirect effect on the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss‑maker’s modified market value calculated under section 707‑325 of the Income Tax Assessment Act 1997, if the real loss‑maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707‑325 of this Act to add an amount to the real loss‑maker’s modified market value for those purposes. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) that: (b) was transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from an entity other than the real loss‑maker. (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997. Disregard an event that is described in subsection 707‑325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707‑325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004. (1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss‑maker) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time) the transferee became the head company of a consolidated group; and (ii) the conditions in one or more of paragraphs 165‑15(1)(a), (b) and (c) did not exist in relation to the real loss‑maker; and (da) the real loss‑maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non‑transferred losses) of the same sort that the transferee made without a transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non‑transferred losses). (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. <table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Limit on utilising the losses</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For this income year:</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the losses that the transferee may utilise cannot exceed:</span></p></td></tr></thead><tbody><tr><td style="width:20.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:120.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The first income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span style="font-size:8pt; vertical-align:2pt">1</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The second income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) </span><span style="font-size:8pt; vertical-align:2pt">2</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the amount of the losses utilised for the income year mentioned in item</span><span> </span><span>1</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The third income year ending after the initial transfer time, or a later income year</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time</span></p></td></tr></tbody></table> ``` (4) Subdivision 707‑C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707‑A of that Act. > Note: This has 2 effects. First, Subdivision 707‑C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707‑A of that Act). (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). (7) This section does not limit the transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company. In working out when a choice may be made under subsection 707‑325(5), 707‑327(5), 707‑328A(4) or 707‑350(5), ignore losses to which section 713‑535 of the Income Tax Assessment Act 1997 applies. > Note: That section deals with losses transferred under Subdivision 707‑A of that Act from certain wholly‑owned subsidiaries of life insurance companies that are members of a consolidated group. Section 707‑405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act. (1) This section reduces the adjustable value of a notional asset that section 40‑35, 40‑37, 40‑38, 40‑40 or 40‑43 treats the head company of a consolidated group as holding, if: (b) that section treats the leaving entity as holding a notional asset because of section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997. > Note: Section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time. The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences. (1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event) happening involving an entity (the originating entity) and another entity (the recipient entity) if: (a) the event occurs in connection with a life insurance company (the member life insurance company) becoming a member of a consolidated group; and (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest) in a company or in another trust. (a) a life insurance company transfers an asset (also the original asset) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320‑200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset) to its segregated exempt assets where, apart from this Subdivision, section 320‑255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event) is made in connection with the life insurance company (also the member life insurance company) becoming a member of a consolidated group. (1) This Subdivision applies only if the originating entity (for a section 713‑505 case) or the life insurance company (for a section 713‑510 case) chooses that it apply. (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713‑510 of the Income Tax Assessment Act 1997; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713‑510 of the Income Tax Assessment Act 1997; and (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs. This Act, and the Income Tax Assessment Act 1997, apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group. (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain) that the originating entity would have made as a result of the deferral event is disregarded; and (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount) under paragraph 320‑15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (1) This section operates if, after the deferral event happens, another event (the new event) happens where the new event is: (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (i) the original asset being transferred to or from the company’s virtual PST under section 320‑180, 320‑185 or 320‑195 of the Income Tax Assessment Act 1997; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320‑235, 320‑240 or 320‑250 of that Act; or (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. > Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713‑505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (1) For a section 713‑505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713‑535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: (a) an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group at a time (the leaving time); and (b) but for the cessation of membership and section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision. Sections 716‑340 and 716‑345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. <table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:345.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Extended operation of sections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 1</span><br><span style="font-weight:bold">Sections</span><span style="font-weight:bold"> </span><span style="font-weight:bold">716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">340 and 716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">345 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> operate in relation to:</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 2</span><br><span style="font-weight:bold">In the same way as they operate in relation to:</span></p></td></tr></thead><tbody><tr><td style="width:5.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:161.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>46</span><span>‑</span><span>90 of that Act</span></p></td><td style="width:156.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>40</span><span>‑</span><span>455 of that Act</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software pool created under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure allocated to a software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Software, expenditure on which was in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>In</span><span>‑</span><span>house software, expenditure on the development of which is allocated to a software development pool</span></p></td></tr></tbody></table> ``` (1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: Section 703‑30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004. (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time) a wholly‑owned subsidiary of the entity that became the head company of the group (the head entity), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier‑1 company of the group at the formation time. Despite the amendment of section 719‑30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) Section 719‑160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719‑160(3) of the Income Tax Assessment Act 1997. (3) However, that effect of section 719‑160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division. (2) Paragraphs 701‑1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier‑1 company at the time the MEC group came into existence. (a) the entity and one or more other entities were members of a potential MEC group as eligible tier‑1 companies, throughout the period: (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier‑1 company, at the time the transitional group came into existence. To avoid doubt, sections 707‑325 and 707‑327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719‑305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707‑A of that Act. Subsection 719‑325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006. (1) A reference in an agreement to item 25 of the table in subsection 721‑10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: (1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: Division 725 applies to a scheme entered into on or after 1 July 2002. It also applies to a scheme entered into on or after 27 June 2002, but only if: ### Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (1) Division 727, as inserted by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 and amended by the New Business Tax System (Consolidation and Other Measures) Act 2003, applies to a scheme entered into on or after 1 July 2002. (b) a presumed indirect value shift that happens under the scheme and affects a realisation event that happens on or after 1 July 2002. (a) the economic benefits taken into account in determining that the scheme has resulted in that indirect value shift or presumed indirect value shift include economic benefits provided by: > Note: In that case, the consequences of the trigger event are worked out under Division 138 or 139 of the Income Tax Assessment Act 1997: see items 13 and 14 of Schedule 15 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002. (1) An indirect value shift does not have consequences under Division 727 of the Income Tax Assessment Act 1997 if, to the extent of at least 95% of their total market value, the greater benefits consist entirely of: (a) a right to have services that are covered by section 727‑240 of that Act provided directly by the losing entity to the gaining entity; or (d) if the losing entity’s 2002‑2003 income year ends before 30 June 2003—the start of the losing entity’s 2004‑2005 income year. (2) For the purposes of section 727‑850 (about a presumed indirect value shift affecting a realisation event) of the Income Tax Assessment Act 1997, subsection (1) of this section applies to the presumed indirect value shift: #### 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (2) Paragraph 727‑470(2)(a) of the Income Tax Assessment Act 1997 (as in force immediately before the commencement of this section) continues to have effect in relation to the indirect value shift as if the repeals and amendments made by Schedule 1, Parts 1 and 2 of Schedule 3 and Schedule 8 to the Tax Laws Amendment (Small Business) Act 2007 had not been made. ## Division 165 Income tax consequences of changing ownership or control of a company ## Subdivision 165 ‑CA—Applying net capital losses of earlier income years ## 165‑95 Application of Subdivision 165‑CA 165‑95 Application of Subdivision 165‑CA of the Income Tax Assessment Act 1997 Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. ## Subdivision 165 ‑CB—Working out the net capital gain and the net capital loss for the income year of the change ## 165‑105 Application of Subdivision 165‑C 165‑105 Application of Subdivision 165‑CB of the Income Tax Assessment Act 1997 Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years. ## Subdivision 165 ‑CC—Change of ownership or control of company that has an unrealised net loss ## 165‑115E Choice to use global method to 165‑115E Choice to use global method to work out unrealised net loss A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: ## Subdivision 165 ‑CD—Reductions after alterations in ownership or control of loss company ## 165‑115U Choice to use global method to 165‑115U Choice to use global method to work out adjusted unrealised loss A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: ## 165‑115ZC When certain notices to be giv 165‑115ZC When certain notices to be given (1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day. (2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice. (a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and (b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and (a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and (b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and (c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group. (5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004. (6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection. ## 165‑115ZD Adjustment (or further adjustm 165‑115ZD Adjustment (or further adjustment) for interest realised at a loss after global method has been used (1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss): (b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions); and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time: (i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or (e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and (f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and (ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred; (2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if: (a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these: (i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset; (ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and (3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act. (a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and (b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section. (5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of: (a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and (b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset. ## Subdivision 165 ‑C—Deducting bad debts ## 165‑135 Application of Subdivision 165‑C 165‑135 Application of Subdivision 165‑C of the Income Tax Assessment Act 1997 Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. ## Division 166 Income tax consequences of changing ownership or control of a listed public company ## Subdivision 166 ‑C—Deducting bad debts ## 166‑40 Application of Subdivision 166‑C 166‑40 Application of Subdivision 166‑C of the Income Tax Assessment Act 1997 Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. ## Division 167 Companies whose shares carry unequal rights to dividends, capital distributions or voting power ## 167‑1 Application of provisions 167‑1 Application of provisions (ii) that could have been deducted, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the deduction had not been limited by the company’s income for that income year; and (ii) that could have been applied, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the application of the loss had not been limited by the company’s capital gains for that income year. ## Division 170 Treatment of company groups for income tax purposes 170‑C Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies ## Subdivision 170 ‑A—Transfer of tax losses within certain wholly‑owned groups of companies 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred ## 170‑45 Special rules affecting utilisati 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred #### 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); ## 170‑55 Ordering rule for losses previous 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 #### 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). ## Subdivision 170 ‑B—Transfer of net capital losses within certain wholly‑owned groups of companies 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred ## 170‑101 Application of Subdivision 170‑B 170‑101 Application of Subdivision 170‑B of the Income Tax Assessment Act 1997 Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years. ## 170‑145 Special rules affecting utilisat 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred #### 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); ## 170‑155 Ordering rule for losses previou 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 #### 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). ## Subdivision 170 ‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies #### Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies ## 170‑220 Direct and indirect interests in 170‑220 Direct and indirect interests in the loss company Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997. ## 170‑225 Direct and indirect interests in 170‑225 Direct and indirect interests in the gain company Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997. ## Subdivision 170 ‑D—Transfer of life insurance business ## 170‑300 Transfer of life insurance busin 170‑300 Transfer of life insurance business If: (a) all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (d) that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and (e) the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place. ## Division 175 Use of a company’s losses, deductions or bad debts to avoid income tax ## Subdivision 175 ‑CA—Tax benefits from unused net capital losses of earlier income years ## 175‑40 Application of Subdivision 175‑CA 175‑40 Application of Subdivision 175‑CA of the Income Tax Assessment Act 1997 Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. ## Subdivision 175 ‑CB—Tax benefits from unused capital losses of the current year ## 175‑55 Application of Subdivision 175‑CB 175‑55 Application of Subdivision 175‑CB of the Income Tax Assessment Act 1997 Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years. ## Subdivision 175 ‑C—Tax benefits from unused bad debt deductions ## 175‑78 Application of Subdivision 175‑C 175‑78 Application of Subdivision 175‑C of the Income Tax Assessment Act 1997 Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years. ## Division 197 Tainted share capital accounts ## Subdivision 197 ‑A—Definitions ## 197‑1 Definitions 197‑1 Definitions > introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament. ## Subdivision 197 ‑B—General application provision ## 197‑5 Application of new Division 197 197‑5 Application of new Division 197 Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day. ## Subdivision 197 ‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off #### Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting ## 197‑10 Subdivision applies to companies 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off #### 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B. ## 197‑15 Account taken to have ceased to b 197‑15 Account taken to have ceased to be tainted when old Division 7B was closed off (1) The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day. (2) No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted. ## 197‑20 After introduction day, account t 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting #### 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting (1) Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if: (a) the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and (b) none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount. (2) No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount. ## 197‑25 Special provisions if company cho 197‑25 Special provisions if company chooses to untaint after introduction day (1) This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account. (2) For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. > Note 2: If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60. (3) For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)). (4) For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. (5) The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if: (a) during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and (b) the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section. (a) the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and (b) during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components. (7) For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. (8) Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it: (b) the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component. (9) Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component. (10) For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. ## Part 3 ‑6—The imputation system (a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and (2) Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001 (the new Act) applies to the plant on this basis: (a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant’s opening adjustable value; and (b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and (c) if you excluded an amount from your assessable income under section 42‑290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999—the cost of the plant, and its opening adjustable value, are reduced by that amount; and (d) if subparagraph (1)(b)(ii) applies to you—you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi‑owner of the plant under the former Act continue. (3) If you were using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis: (a) for the diminishing value method—replace the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate you were using; and (i) replace the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate you were using; and (ii) increase the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note 1: Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced. > Note 2: Small business entities can choose to work out the decline in value of their depreciating assets under Division 328. (a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or (3) If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40‑70(1) or 40‑75(1) of the new Act that includes the plant’s effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and (2) For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets. (3) For a case where the plant is merged into another depreciating asset, section 40‑125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it. (b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and (a) you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and (b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU’s opening adjustable value. (1) Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001. (2) For a unit of software for which you were deducting amounts under Subdivision 46‑B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis: (d) you must use the same effective life you were using under Subdivision 46‑B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001. (1) This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day. (b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and (c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and (1) This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001. > Note: Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8). (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330‑80 of the former Act for your income year ending on 30 June 2001; and (c) in applying the formula in section 40‑75 of the new Act for the income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The remaining effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these: (i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and (ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (7) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and (b) the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of expenditure incurred in carrying on eligible quarrying operations—the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (i) you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day) after 30 June 2001; or (ii) the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day) after 30 June 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which the start day occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year. there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (1) This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330‑H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and (c) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (i) any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset); (i) any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (4) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (4) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (b) the expenditure would have been transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330‑H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for your income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (1) Despite subsections 40‑35(5), 40‑38(5) and 40‑40(4), there is no additional decline in the value of the notional asset referred to in those subsections if: (a) apart from this section, subsection 40‑35(5), 40‑38(5) or 40‑40(4) would apply because the real asset referred to in that subsection is disposed of; and (a) at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373‑35 of the former Act; and (b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day. (a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and (1) Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time). (2) Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time. (a) you have deducted or can deduct an amount under Subdivision 387‑G of the former Act for an amount (the qualifying amount) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and (b) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and (1) This section applies to you if you have deducted or can deduct an amount under Subdivision 400‑A of the former Act for an amount (the qualifying amount) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400‑A of the former Act. (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and (c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400‑15(3) of the former Act; and (1) Units of plant that you had allocated to a pool under Subdivision 42‑L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act. (a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and (c) in applying the formula in section 40‑70 of the new Act for your income year in which 1 July 2001 occurs—it has a base value equal to that opening adjustable value; and (d) you replace the component in the formula in subsection 40‑70(1) of the new Act that includes an asset’s effective life with the pool percentage you were using for the pool; and (e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40‑115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and (f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset. (3) An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item). > Note 1: You work out the decline in value of an item removed under this subsection under Subdivision 40‑B of the new Act, using the cost for it worked out under section 40‑205 of the new Act. (b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset. (2) The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year) in this way: (a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and (b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section. (a) for a unit of plant (including IRUs and expenditure on software that is not pooled)—its undeducted cost at the end of 30 June 2001; or (b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence—the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or (c) for transport capital expenditure—the entity’s amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or (d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (e) for expenditure on evaluating the impact on the environment of a project—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (f) for assets that were pooled under Subdivision 42‑M or 42‑L of the former Act—the closing balance of the pool at the end of 30 June 2001. (4) The asset’s base value for applying the formula in section 40‑70 of the new Act for the diminishing value method is that opening adjustable value. (5) The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an item of plant for which you were using the prime cost method—using the rules in section 40‑10 of this Act; and (c) for a unit of software for which the entity was deducting amounts under Subdivision 46‑B of the former Act—using the rules in subsection 40‑25(2) of this Act; and (f) for an amount of expenditure on evaluating the impact on the environment of a project—using the rules in section 40‑55 of this Act. (6) The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an amount of unrecouped expenditure under Division 330 of the former Act—using the rules in section 40‑35 of this Act; and (b) for an amount of transport capital expenditure under Division 330 of the former Act—using the rules in section 40‑40 of this Act; and (7) The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act. (a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑C of the former Act; or (b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑H of the former Act; or (c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387‑B of the former Act; or (d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; or (e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365. (9) The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001. (10) You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount). (11) You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount. (1) Subsections 40‑65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened: (b) you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act. (a) paragraph 40‑65(6)(a) of the Income Tax Assessment Act 1997 included both events set out in subsection (1) of this section; and (b) subsections 40‑65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events. (1) A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936. (2) An amount you have deducted or can deduct for a water facility under Subdivision 387‑B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40‑F of the new Act. (3) A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936. (a) you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40‑115 (about splitting a depreciating asset) or 40‑125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and (b) it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40‑72 of that Act; (2) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if: (c) it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40‑72 of that Act. (3) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset) before 10 May 2006 if: (b) the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and (d) it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40‑72 of that Act. (a) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you: (b) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001. (2) If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act. (3) Otherwise, Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section. (a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or (b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or (ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life. (1) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001. > Note: If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40\. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997. (1A) Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001. (1B) Subsection (1) applies to a mining, quarrying or prospecting right (the new right) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if: (i) the other company is a member of the same wholly‑owned group as the original holder and was a member of that group just before that day; and (ii) the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer. (1D) Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if: (b) the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001. (a) you acquired, under an interest realignment arrangement, an interest (a new interest) in a mining, quarrying or prospecting right; and (b) the interest was acquired in exchange for one or more other interests (old interests) in other mining, quarrying or prospecting rights; and Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001. (a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or (b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership; the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act. (3) An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that: (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act. (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act. (6) Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243. (7) An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if: (a) you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and (8) The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section. (c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act. (2) Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001. A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act. if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011. (2) The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011. (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset for an income year is the amount worked out under section 40‑130 if: (a) the income year is the year in which you start to use the asset, or have it installed ready for use, for a taxable purpose; and (b) subsection (2) (about businesses with turnover less than $500 million) applies to you for the year and for the income year in which you started to hold the asset (if that was an earlier year); and > Note 1: An effect of paragraph (1)(a) is that this Subdivision only applies to one income year per asset. See also subsection 40‑135(1). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $500 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. Exception—assets for which the decline in value is worked out under section 40‑82 or Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (3) However, this section does not apply to a depreciating asset for an income year if you work out the decline in value of the asset for the income year under any of the following: (1) For the purposes of paragraph 40‑120(1)(c) and section 328‑182, you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you: > Note: Section 328‑182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997. (i) entering into a contract under which you hold the post‑12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑12 March 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post‑12 March 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (8) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (9) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (10) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (1) For the purposes of section 40‑120, the decline in value for the income year in which paragraph 40‑120(1)(a) is satisfied (the current year) is: > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 12 March 2020 to 30 June 2020 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2020 to 30 June 2021. (a) 50% of the asset’s cost as at the end of the current year, disregarding any amount included in the second element of the asset’s cost after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997, assuming its cost were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (3) However, the amount worked out under subsection (2) for an income year cannot be more than the amount that is the asset’s cost for the year. (a) 50% of the sum of the asset’s opening adjustable value for the current year and any amount included in the second element of its cost for that year, disregarding any amount included in that second element after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997 assuming: (ii) for the prime cost method—the component “Asset’s \*cost” in the formula in subsection 40‑75(1) of that Act (as adjusted under that section) were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (b) for the prime cost method—the sum of its opening adjustable value for the income year and any amount included in the second element of its cost for that year. (1) The decline in value of a depreciating asset is not worked out under this Subdivision for an income year if this Subdivision already applied in working out the decline in value of the asset for an income year. (2) For an income year later than the year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (3) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (4) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) You may choose that the decline in value of a particular depreciating asset for an income year, and subsequent income years, is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the first income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. If this Subdivision applies to work out the decline in value of a depreciating asset you hold for an income year, no other provision of this Act or the Income Tax Assessment Act 1997 applies to work out that decline in value. (1) For the purposes of this Subdivision, you are covered by this section for a depreciating asset if, on or before 30 June 2023: (2) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (3) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or Exception—assets for which the decline in value is worked out under Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (a) the asset is allocated to a low‑value pool, or expenditure on the asset is allocated to a software development pool (see Subdivision 40‑E of the Income Tax Assessment Act 1997); or (b) you or another taxpayer has deducted or can deduct amounts for the asset under Subdivision 40‑F of the Income Tax Assessment Act 1997 (about primary production depreciating assets). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $5 billion; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this section. (ii) if the 2019‑20 income year ends on or before 6 October 2020—the sum of your ordinary income (if any) and statutory income (if any) for the 2019‑20 income year; and (c) the sum of the amounts worked out under subsection (3) for the 2016‑17, 2017‑18 and 2018‑19 income years exceeds $100 million. (b) next, work out the cost of each of those assets (including any amounts included in the second element of the asset’s cost at a time that is in the income year); (4) For the purposes of subsection (3), disregard an asset if, at the time you first used the asset, or had it installed ready for use, for a taxable purpose: (a) it was not reasonable to conclude that you would use the asset principally in Australia for the principal purpose of carrying on a business; or (5) For the purposes of paragraph (3)(b), to work out the cost of a depreciating asset that is capital works (see section 43‑20 of the Income Tax Assessment Act 1997): (a) disregard section 40‑45 of that Act and work out the cost of the capital works using Subdivision 40‑C of that Act; and (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under subsection (3) if: (a) where section 40‑155 covers you for the current year (regardless whether section 40‑157 also covers you for the current year)—an exclusion applies to you and the asset for the current year under section 40‑165 (about exclusions for businesses with turnover of $50 million or more); or (ii) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s start time occurs in the current year—the asset’s cost as at the end of the current year, disregarding any amount included in the asset’s cost after 30 June 2023; or (b) if the asset’s start time occurred in an earlier year—the sum of its opening adjustable value for the current year and any amount included in the second element of its cost for the current year, disregarding any amount included in the asset’s cost after 30 June 2023. > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 6 October 2020 to 30 June 2021 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2021 to 30 June 2022. (a) where paragraph 40‑160(2)(a) applies—section 40‑155 would not cover you for the income year if the reference in that section to $5 billion were instead a reference to $50 million; and (i) entering into a contract under which you hold the post‑6 October 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑6 October 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of satisfying paragraph 40‑160(1)(a) for the post‑6 October 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you already satisfied paragraph 40‑160(1)(a) of this Act for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (9) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (1) For the purposes of subsections 40‑160(2) and 40‑170(1A), an exclusion applies to you and an asset for an income year if any of the exclusions in this section applies in relation to the asset. (4) This exclusion applies in relation to the asset if the asset is available for use, at any time in the income year, by any of the following: (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under this section if: (ii) you started to use the asset, or have it installed ready for use, for a taxable purpose in an earlier income year; and (b) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under section 40‑82 of the Income Tax Assessment Act 1997—the amount worked out under subsection (3); or (b) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under Subdivision 40‑BA of this Act—the amount worked out under subsection (4); or Assets affected by section 40‑82 of the Income Tax Assessment Act 1997 (about assets costing less than $150,000, medium sized businesses) (a) the amount that would be the asset’s decline in value for the year under section 40‑82 of the Income Tax Assessment Act 1997, assuming the reference in subparagraph 40‑82(3A)(b)(ii) of that Act to 31 December 2020 were instead a reference to the 2020 budget time; and (a) the amount that would be worked out under paragraph 40‑130(2)(a) or (4)(a) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(a) and (4)(a) to 30 June 2021 were instead references to the 2020 budget time; and (c) the amount that would be worked out under paragraph 40‑130(2)(b) or (4)(b) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(b) and (4)(b) to “the amount worked out under paragraph (a)” were instead references to “the amounts worked out under paragraphs 40‑170(4)(a) and (b)”. (a) the amount that would be the asset’s decline in value for the year under Division 40 of the Income Tax Assessment Act 1997, disregarding any amounts included in the eligible second element worked out under section 40‑175 of this Act for the asset for the year; and The amount worked out under this section (the eligible second element) for a depreciating asset for an income year is the sum of any amounts included in the second element of the asset’s cost at a time that is in both of the following periods: (1) For an income year later than a year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (2) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (3) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) This section applies if the decline in value for a depreciating asset for an income year is worked out under this Subdivision, and at a time (the balancing adjustment time) in a later income year: (i) it becomes not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (b) none of the requirements in paragraphs 40‑295(1)(a), (b) or (c) of the Income Tax Assessment Act 1997 are satisfied in relation to the asset. (2) For the purposes of Subdivision 40‑D of the Income Tax Assessment Act 1997 assume that, at the balancing adjustment time, you stop using the asset, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again. (3) For the purposes of section 40‑180 of the Income Tax Assessment Act 1997 assume that the reference in item 3 of the table in subsection 40‑180(2) of that Act to “because you stop using it for any purpose expecting never to use it again” were instead a reference to “because of section 40‑185 of the Income Tax (Transitional Provisions) Act 1997”. (4) If a balancing adjustment event happens to a depreciating asset you hold because of this section, this Subdivision cannot apply to work out the decline in value of the asset for a later income year. (1) You may choose that the decline in value of a particular depreciating asset for an income year is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year. (1) Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40. (a) you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset: (ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and (4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day. (5) The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if: (i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or (ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and  > sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose. (7) Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens: (a) if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b). (i) an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and (ii) the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and (3) The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount. (a) on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and (c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and (ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal; (2) There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal. (3) Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount. If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997. (a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and (b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and: (i) the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, the R&D entity is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—a clawback amount under section 355‑447 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑466 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. (b) section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions. > Note 2: The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and: (i) the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset; (ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, an R&D entity (the partner) that is a partner in the R&D partnership and is entitled to one or more new law deductions for one or more income years for the asset, is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—a clawback amount under section 355‑449 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑468 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s new law deductions mentioned in paragraph (2)(b) of this section. (4) Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event. > Note: Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions. (1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant. (b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and (3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it. (a) there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and (b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act. (2) The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor. (3) The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and <table cellspacing="0" cellpadding="0" style="width:364.2pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:353.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading" style="page-break-inside:avoid"><span>Conditions for small business taxpayers retaining accelerated rates</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Condition</span></p></td></tr></thead><tbody><tr><td style="width:21.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:321.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>The transferee must have been a small business taxpayer for the income year (the </span><span style="font-weight:bold; font-style:italic">start year</span><span>) that includes the time when the entity first used the plant, or first had it installed ready for use.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>2</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>At that time, neither of these applies:</span></p><p class="Tablea"><span>(a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;</span></p><p class="Tablea"><span>(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection</span><span> </span><span>(5).</span></p></td></tr></tbody></table> ``` (4) For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership. (5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement. (a) for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or (i) replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and (ii) increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).  (b) if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11). (c) that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and (d) that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and (e) that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity. (a) for taxable supplies (if any) the entity makes during the year in the course of carrying on a business—the value (as defined by section 9‑75 of the GST Act) of the supplies; and (b) for other supplies the entity makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies. (1) The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for: (a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (c) for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or (d) for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant. (3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115. (4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain. (5) Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee. (i) the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or (a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and (1) A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act. (2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year. For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if: Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act. (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset): and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply. (i) for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or (ii) for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and (c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act. (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and (2) Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act. The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under: (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on: (2) You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act. (3) A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under: (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and (2) Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act. A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act. The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001. If: (d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act; (a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and (a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and (b) the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and (c) paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997. Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years. (1) For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section. (b) the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (b) that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (1) There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea" style="page-break-after:avoid"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a); and</span></p><p class="Tablea" style="page-break-after:avoid"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (b) disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (f) an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division. (4) If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45‑5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest. (5) If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45‑10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest. Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Disregard the use of the following amounts in determining (for the purposes of Subdivision 50‑A of the Income Tax Assessment Act 1997 whether a fund established before 1 July 1997 operates and pursues its purposes in Australia: Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years. (2) However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date. Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if: (b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time. Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years. 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years (1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act. <table cellspacing="0" cellpadding="0" style="margin-left:56.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:258.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Application provisions for specific sections</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-size:9pt; font-weight:bold">Item</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">This section of the </span><span style="font-size:9pt; font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-size:9pt; font-weight:bold"> ...</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">Applies as described in this provision of this Act ...</span></p></td></tr></thead><tbody><tr><td style="width:24.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55(1)</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>95</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>8</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td></tr></tbody></table> ``` (a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and (b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997. > Note: Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year. (b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997; sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997). > Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock. (3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997. (a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and (b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936; > Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal. #### 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997. (1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year. (2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936. (3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year: (a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners; (b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed. > Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year. > Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year. (b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year; the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year. (2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. (3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2). #### 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997. #### 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business (1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. (2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity. > Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997. (1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. (2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value. > Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997. #### 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year. (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. > Note: Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. > Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given). (5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act). (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment. > Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%. (5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%. (6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.  > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section. (b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4). Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age. Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later. Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies. Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3. (4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997. (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%. > Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986. (5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D. > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. (a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and (b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year). (3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and (2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual: (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income. > Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F. > Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997. > Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997. #### 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 (1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012. (2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies. (3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act. (b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009. (2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if: (i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest; (iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or (i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest; (iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009. (2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time. (4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2): (a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and (b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being: (ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and (c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and (d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if: (i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or (ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and (e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and (i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and (ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and (g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest. (a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced: (i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or (ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and (b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5. (2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right. (3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right. (2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. (3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section. Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years. (1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision. > Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision). > Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936). > Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997. (a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936. (1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936. (2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997. > Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997. (3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and (d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; (f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time. > Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and (d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015. (a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or (4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if: (b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset. The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year. (a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and (1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied: (b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and (d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works). (3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936. Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936. (b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006. (2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement. > Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement. Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual: (b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her. 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act (1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee). (2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year: (3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection. #### 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997. Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936). (2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if: (a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; (a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011); (b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986. > Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section. If: (a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and (b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936; Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995. (1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997. (2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997. (3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997. (4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997. > Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one. Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year: (a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and (b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year; the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation. Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset. (b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section); > Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply. (1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if: (a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and (2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value. (4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value. (a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997. (2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less. (1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936: (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. (1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if: (2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by: (a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or (a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or (2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period. Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year: If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997. (1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002. (2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset. (3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required. (i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and (ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and (c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and (f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997). (a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or (1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:  > total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part. (a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or (2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section. (3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1). (1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences. > Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997. (c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets). (4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act. (5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act. Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement. (a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and (2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time. (a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and (ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs. (2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer. (a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and (b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest; (2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event. (3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly. (4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly. <table cellspacing="0" cellpadding="0" style="width:362.55pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:351.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Creating a CGT asset</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">CGT event number</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Applicable amount</span></p></td></tr></thead><tbody><tr><td style="width:50.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D1</span></p></td><td style="width:290.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the incidental costs the originating company incurred that relate to the CGT event</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D2</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the option</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D3</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the right</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>F1</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred on the grant, renewal or extension of the lease</span></p></td></tr></tbody></table> ``` (5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day. A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision. (a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996. (b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. (b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend. (3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities. (1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company. (2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred. (3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company. (1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of: (2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of: (3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note. (1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised. (b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and (ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act. You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and (b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996. (c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and (c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over. (3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. (a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and (c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and (d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act. (3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division. Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years. A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: (1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day. (2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice. (a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and (b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and (a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and (b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and (c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group. (5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004. (6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection. (1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss): (b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions); and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time: (i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or (e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and (f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and (ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred; (2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if: (a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these: (i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset; (ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and (3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act. (a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and (b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section. (5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of: (a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and (b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset. Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. (ii) that could have been deducted, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the deduction had not been limited by the company’s income for that income year; and (ii) that could have been applied, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the application of the loss had not been limited by the company’s capital gains for that income year. 170‑C Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred #### 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years. #### 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). #### Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997. Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997. If: (a) all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (d) that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and (e) the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place. Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years. > introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament. Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day. #### Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting #### 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B. (1) The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day. (2) No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted. #### 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting (1) Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if: (a) the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and (b) none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount. (2) No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount. (1) This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account. (2) For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. > Note 2: If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60. (3) For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)). (4) For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. (5) The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if: (a) during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and (b) the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section. (a) the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and (b) during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components. (7) For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. (8) Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it: (b) the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component. (9) Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component. (10) For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002: (b) lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination; (c) a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination); (e) the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination); (f) the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination). Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period: 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows: (a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and (i) in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and (ii) in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. > Note: A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002. #### 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002: (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:23.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:87.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A franking surplus</span></p></td><td style="width:220.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.009.png" width="175" height="58" alt="Start formula Amount of the class A franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.010.png" width="190" height="56" alt="Start formula Amount of the class B franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.011.png" width="190" height="56" alt="Start formula Amount of the class C franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` #### 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus): (a) a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Original surplus</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:85.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>class A</span></p></td><td style="width:220.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.012.png" width="169" height="38" alt="Start formula Amount of the original class A surplus times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.013.png" width="169" height="38" alt="Start formula Amount of the original class B surplus times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.014.png" width="169" height="38" alt="Start formula Amount of the original class C surplus times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (4) If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit): (a) a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company. (5) The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking deficit into 1997 Act franking debit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Original deficit</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking debit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(4)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:70.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A</span></p></td><td style="width:235.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.015.png" width="164" height="38" alt="Start formula Amount of the original class A deficit times start fraction 39 over 61 end fraction end formula "></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.016.png" width="164" height="38" alt="Start formula Amount of the original class B deficit times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.017.png" width="164" height="38" alt="Start formula Amount of the original class C deficit times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (2) A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if: (c) the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions. (3) The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if: (b) the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and (1) While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit. (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year. (3) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: > Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act. (1) The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account. (a) a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time; (3) If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if: (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity. #### 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If: the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time. (1) Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections. (2) If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year. Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year. Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year. (5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in: that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement. (6) The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (7) The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (2) The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (3) The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (i) are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and (a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and (b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section. (a) whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and (1) This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002. (a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and (3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded. (1) This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002; (2) If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (3) If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (4) If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. (5) If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows: (a) any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and (i) in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and (ii) in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. #### 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF.  #### 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act). (2) If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus): (a) a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF. (4) If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit): (a) a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF. This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period). (1) The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period: (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (1) The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period. (2) The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner. (3) The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5. (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and (d) the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner; the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received. (3) A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time: (1) A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends. (2) However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period. (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (a) the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed: (d) the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and (e) the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return. (2) The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day. (1) The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period. (2) The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made. Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period. (b) on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax); the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed: (c) the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and (d) the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return. (2) The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day. The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period: If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day. If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and If: (a) a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and (b) the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment; In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment. If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment. The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with. If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953. (1) Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period. (a) the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and (b) the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3); the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on: (c) if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or If: Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax. Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division. If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997. (a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day: (3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002. (a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002: > Note: As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date. (b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997. In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003. (1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year. (a) a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of: (i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time; (iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period; (2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if: (b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time: (ii) the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. > Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. > Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. (7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table: <table cellspacing="0" cellpadding="0" style="width:365.35pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount of the franking credit and the exempting debit</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">If:</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the credit and debit is:</span></p></td></tr></thead><tbody><tr><td style="width:22.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The period starts immediately after 7.30</span><span> </span><span>pm by legal time in the Australian Capital Territory on 13</span><span> </span><span>May 1997</span></p></td><td style="width:141.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Both these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was not in surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>All these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was in surplus at the start of the period;</span></p><p class="Tablea"><span>(c) the surplus in the account at the switch time is greater than the surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the franking surplus in the Australian company’s franking account at the switch time; and</span></p><p class="Tablea"><span>(b) the franking surplus in the Australian company’s franking account at the start of the period</span></p></td></tr></tbody></table> ``` (a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and (b) the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period. Subdivision 235‑I of the Income Tax Assessment Act 1997 applies to assets acquired by the trustee of an instalment trust in: (1) Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years. (2) However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time). (3) The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997. Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997. (2) Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in: (1) Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that: (b) is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose. (a) if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007. > Note: To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997. (b) contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option; the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option. (3) For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5). (4) If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is: (a) the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less (b) the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest. (5) If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is: (6) If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil. (1) If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one. (2) If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year. (3) If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year. (a) for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and (b) for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year: Step 1. Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. Step 2. Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3). Step 3. If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year. > Note: Example: Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75): (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred: (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times: (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate. Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008. (a) the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and (b) the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities: (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (i) the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or (ii) the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and (f) none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made: (i) Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event; (ii) a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year. (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (b) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (c) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year #### 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year (a) the requirements set out in paragraphs 275‑610(1)(a), (b) and (c) of the Income Tax Assessment Act 1997 are satisfied in respect of an amount of non‑arm’s length income of a managed investment trust in relation to an income year; and (b) the managed investment trust became a party to the scheme mentioned in paragraph 275‑610(1)(a) of that Act before the day on which the Bill that became the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 was introduced into the House of Representatives; and Division 276 of the Income Tax Assessment Act 1997 as inserted in that Act by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (the amending Act) applies as set out in subitem 1(1) of Schedule 8 to the amending Act. (b) if the trustee of the trust has made a choice for the purposes of paragraph 1(1)(b) of Schedule 8 to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016—the first income year starting on or after 1 July 2015; or (c) if the trustee of the trust has made a choice for the purposes of subparagraph 276‑10(1)(e)(i) of the Income Tax Assessment Act 1997 in respect of the 2016‑17 income year—that income year. (c) the trust is an AMIT for an income year (the discovery year) that is the starting income year or a later income year. (1) This section applies if the trust has an under or over of a character in the discovery year relating to the base year. (b) if, at a time, the trust sent its members distribution statements for an income year that is prior to the starting income year—assume that the trust sent those members AMMA statements for that income year at that time. (3) For the purposes of Division 276 of the Income Tax Assessment Act 1997, treat the under or over mentioned in subsection (1) as an under or over of the AMIT, in the discovery year relating to the base year, of the character mentioned in that subsection. (a) had the under or over mentioned in subsection (1) been discovered before the starting income year, this Act would have operated to produce a particular effect (the pre‑AMIT scheme effect) for the base year in relation to the amount or amounts reflected in the under or over; and 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT #### 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT (b) working out the amount (if any) of the entity’s capital gain under subsection 104‑70(4) of the Income Tax Assessment Act 1997. (3) For the purpose of working out the amount of the non‑assessable part mentioned in paragraph 104‑70(1)(b), treat the following provisions as being in operation at the time the payment was made: (b) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in paragraph (a). (4) Subsection (3) does not apply to the extent (if any) that the entity, in the income tax return that it lodged for the income year in which the payment was made, included the amount of the payment in its assessable income for that income year. (5) For the purposes of section 118‑20 of the Income Tax Assessment Act 1997, treat this section as being in Part 3‑1 of that Act. (2) The Commissioner cannot amend the entity’s assessment for the income year in which the payment was made in a particular way if: (b) the Commissioner could not amend the assessment in that way if the following provisions were in operation at the time the payment was made: (ii) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in subparagraph (i); and Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82‑10F). (2) The object of this section is to apply (with modifications) provisions limiting deductibility in respect of certain contributions made during the period that: (a) Subdivisions AA and AB of Division 3 of Part III of the Income Tax Assessment Act 1936, as in force just before they were repealed by the Superannuation Legislation Amendment (Simplification) Act 2007; (b) any other provision of the Income Tax Assessment Act 1936, or of any instrument made under that Act, to the extent that it relates to the operation of those Subdivisions; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of those Subdivisions. (b) the deduction limit mentioned in section 82AAC for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (c) the deduction limit mentioned in section 82AAT for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (d) Division 290 of the Income Tax Assessment Act 1997 did not apply to contributions made during the income year mentioned in paragraph (a). (2) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of a defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection and subsection (4), the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 5 September 2006; (b) the defined benefit interest mentioned in paragraph (2)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 5 September 2006, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (2)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (4) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of the defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection, the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 12 May 2009; (b) the defined benefit interest mentioned in paragraph (4)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 12 May 2009, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (4)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (1) The object of this section is to apply (with modifications) provisions relating to excess non‑concessional contributions tax in respect of certain contributions made during the period that: (b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision. (ea) in a case where paragraph 292‑95(1)(b) of that Act would have allowed the contribution mentioned in that paragraph to be made at a time within that period—that paragraph allowed the contribution to be made on or before 30 June 2007; and (f) paragraph 292‑95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and (fa) in a case where subsection 292‑100(2), (4), (7) or (8) of that Act would have allowed the contribution mentioned in that subsection to be made at a time within that period—that subsection allowed the contribution to be made on or before 30 June 2007; and (g) paragraph 292‑100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and (h) contributions made during that period that are covered under section 292‑100 of that Act reduce the person’s CGT cap amount for the 2007‑2008 financial year in accordance with subsection 292‑105(2) of that Act (and despite subsection (1) of that section); and (i) if the conditions in subsection (4) are satisfied—the person’s excess non‑concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and (b) the Commissioner gives the person a transitional release authority under subsection 292‑80A(2) in response to the application; and (c) the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292‑80B within 21 days after the date of the release authority; and (d) the superannuation provider pays the person the amount required under section 292‑80C in relation to the transitional release authority. (b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act). (6) The amount to be included in the first person’s amount of non‑concessional contributions under subparagraph (3)(b)(ii) is the sum of: (a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and (b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made. (c) under Division 295 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)), the contribution is included in the assessable income of the superannuation provider in relation to the superannuation plan to which the contribution is made; and (8) For the purposes of paragraph (7)(b), treat the person as an employee of the other entity if the person would be treated as an employee of the other entity under Division 290 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)). (1) A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007. (2) The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292‑80(3)(b)(i), the person would have excess non‑concessional contributions for the financial year mentioned in paragraph 292‑80(3)(a). (4) For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out: The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 21 days after the date of the release authority. (1) A superannuation provider that has been given a transitional release authority in accordance with section 292‑80B must pay to the person within 30 days after receiving the release authority the least of the following amounts: (a) if the person requests the provider in writing to pay a specified amount in relation to the release authority—that amount; (c) the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person in complying superannuation plans. > Note 1: Section 288‑95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection. > Note 2: Section 288‑100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority. > Note 3: For reporting obligations on the superannuation provider in these circumstances, see section 390‑65 in Schedule 1 to the Taxation Administration Act 1953. (2) The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person in complying superannuation plans. (3) Section 307‑125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section. (a) your non‑concessional contributions cap for the 2015‑2016 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsection 292‑85(7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 applies after the commencement of this section as if: (d) subsection 292‑85(6) of that Act as so amended had been applied (taking into account paragraph (c) of this subsection) for the purposes of working out your non‑concessional contributions cap for the 2016‑2017 financial year. (2) For the purposes of working out your non‑concessional contributions caps for the 2017‑2018 financial year and the 2018‑2019 financial year, if: (a) your non‑concessional contributions cap for the 2016‑2017 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsections 292‑85(6) and (7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 apply after the commencement of this section as if the amount worked out under subsection 292‑85(5) of that Act as so amended were $380,000. (3) To avoid doubt, this section does not affect your non‑concessional contributions cap for any financial year that ended before 1 July 2017. The tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your non‑concessional contributions (see section 292‑90 of the Income Tax Assessment Act 1997) for the financial year. (2) Subject to section 294‑55, the amendments of Division 294 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Treasury Laws Amendment (2017 Measures No. 2) Act 2017 apply on and after 1 July 2017. Despite sections 294‑30 and 294‑140 of the Income Tax Assessment Act 1997 (which are about when you have excess transfer balance), you do not have excess transfer balance in your transfer balance account on any day in the period of 6 months beginning on 1 July 2017 if: (a) the only transfer balance credits in the account in that period arose under item 1 of the table in subsection 294‑25(1) of that Act (which is about superannuation income streams you have just before 1 July 2017); and (b) the sum of those transfer balance credits exceeds your transfer balance cap, but is less than or equal to $1,700,000; and (c) at the end of the period, the sum of all the transfer balance debits arising in your transfer balance account equals or exceeds the amount of the excess from paragraph (b). (1) Despite subsection 294‑10(2), a transfer balance credit arises under item 4 of the table in subsection 294‑25(1) of the Income Tax Assessment Act 1997 only in relation to a borrowing that arises under a contract entered into on or after 1 July 2017. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2017 is treated as if it arose under a contract entered into before 1 July 2017 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) on 1 July 2017, a transfer balance debit arose in your transfer balance account under item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997; and (b) the sum of all the transfer balance credits that arise in your transfer balance account under item 1 of the table in subsection 294‑25(1) of that Act exceeds the amount that would, apart from this section, be the amount of that debit. (2) Despite column 2 of item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997, the amount of the transfer balance debit is instead equal to the sum worked out under paragraph (1)(b) of this section. 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain > The object of this Subdivision is to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the following legislative changes: (a) the introduction of a transfer balance cap (as a result of Schedule 1 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016); (b) the exclusion of transition to retirement income streams (and similar income streams) from being superannuation income streams in the retirement phase (as a result of Schedule 8 to that Act). (a) starting on the start of the day on which the Bill that became the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 was introduced into the House of Representatives; and (a) at the start of the pre‑commencement period, a CGT asset of a fund is a segregated current pension asset of the fund; and (i) at a time (the cessation time) in the pre‑commencement period, the asset ceases to be a segregated current pension asset of the fund; or (ii) at the start of 1 July 2017 (also the cessation time), the asset ceases to be a segregated current pension asset of the fund because it supports a superannuation income stream covered by subsection 307‑80(3) of the Income Tax Assessment Act 1997; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (b) the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year is greater than nil; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and #### 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑115(3)(a), the fund makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the fund’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Subsection 295‑390(1) of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). > 2016‑17 non‑exempt proportion means 1 minus the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year. #### 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset (i) the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997 in respect of the trust for the 2016‑17 income year; (ii) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year; and (d) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and #### 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑125(3)(a), the trust makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the trust’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Section 295‑400 of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). (a) unless paragraph (b) applies—1 minus the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997; or (b) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage worked out by subtracting the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year from 100%. This Subdivision applies to an entity that is the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust. For the purposes of this Subdivision, an asset is a 30 June 1988 asset of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust if the entity owned it at the end of 30 June 1988. > Note: Section 295‑90 of the Income Tax Assessment Act 1997 treats these assets as having been acquired on 30 June 1988. (1) The first element of the cost base of each 30 June 1988 asset of the entity’s is the greater of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). (2) The first element of the reduced cost base of each 30 June 1988 asset of the entity’s is the lesser of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). the market value of the asset as at the end of 30 June 1988 is the average of the highest and lowest trade prices for identical assets recorded on 30 June 1988 in whichever of the following markets is applicable: (d) if, on that date, there was a State capital city market (other than the Sydney market) that recorded a higher volume of trading than the Sydney market in identical assets—that State capital city market; (2) For the purposes of this section, an asset is taken to have been listed on an Australian stock exchange on 30 June 1988 if, and only if, on that day the asset had the status of having been granted official quotation by a securities exchange within the meaning of the former Securities Industry Act 1980 or the law of a State or Territory corresponding to that former Act. (b) at any time during the period commencing at the time when the shares were acquired and ending at the end of 30 June 1988, the company paid an amount that was not a dividend to the entity in respect of the shares; (b) at any time during the period commencing at the time when the interest or unit was acquired and ending at the end of 30 June 1988, the trustee of the trust paid an amount to the entity in respect of the interest or unit, being: (i) in a case where the entity was exempt from tax for the year of income in which the payment was made—an amount that, if the entity had not been exempt from tax, would not have been the entity’s assessable income; or the cost base to the entity of the interest or unit as at 30 June 1988 is reduced by so much of the amount as is not attributable to a deduction allowed under former Division 10C or 10D of the Income Tax Assessment Act 1936. (1) Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (2) and (3) of this section apply if an entity exercises rights or options as mentioned in that section to acquire: (b) the greater of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (b) the lesser of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (4) The payment referred to in subsection (2) or (3) can include giving property. To the extent that the payment does, use the market value of the property in working out the amount of the payment. (1) A notice given under subsection 82AAT(1A) or (1CB) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑170 of the Income Tax Assessment Act 1997. (2) A notice given under subsection 82AAT(1C) or (1CD) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑180 of the Income Tax Assessment Act 1997. (1) A proportion of the ordinary income and statutory income of a continuously complying fixed interest ADF of an income year that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).  > Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the income year. > Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the income year. (4) A choice for the purposes of the definition of reckoning time in subsection (5) must be made on or before the date of lodgment of the income tax return of the ADF for the income year to which the choice relates, or before a later day allowed by the Commissioner. > continuously complying fixed interest ADF, in relation to an income year (the current year), means a fund that is a fixed interest complying ADF in relation to each of the following years: > current 25 May balance, in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time: (b) subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 September 1989 is to be added to the balance; (b) a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that day, made a deposit with the ADF that consisted wholly or partly of the roll‑over (as defined in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 as in force on that day) of an eligible termination payment as so defined, being an eligible termination payment that included a concessional component (as so defined). > fixed interest complying ADF, in relation to a year of income, means a complying ADF where both of the following conditions are satisfied: (a) not less than 90% of the amount that, apart from this section, would be the assessable income of the ADF of the income year (other than non‑arm’s length income or amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997) consists of any one or more of the following: (ii) any profit arising on the disposal, redemption, cancellation or maturity of a CGT asset referred to in paragraph 295‑85(3)(b) of the Income Tax Assessment Act 1997; (iii) an amount included in assessable income under Division 16E of Part III of the Income Tax Assessment Act 1936 (or would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply); (ii) virtual PST life insurance policies (as defined in the Income Tax Assessment Act 1997) issued by a life insurance company. > original 25 May balance, in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988. > reckoning time, in relation to an ADF in relation to an income year, means the beginning of the income year, or such other time during the income year as the ADF chooses in accordance with subsection (4). (6) This section does not apply to an ADF in relation to an income year unless the whole of the benefit that would accrue to the ADF from the application of this section in relation to the income year has been, or can reasonably expected to be, passed on to eligible depositors. An election made by the trustee of a complying superannuation fund under subsection 279(4) of the Income Tax Assessment Act 1936 that had effect for the income year of the fund in which 30 June 2007 occurs continues to have effect as if it had been made under section 295‑465 of the Income Tax Assessment Act 1997. Subdivisions 295‑I (no‑TFN contributions) and 295‑J (Tax offset for no‑TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006‑2007 income year ends on a day (the end day) after 1 July 2007 as if: (b) the entity’s no‑TFN contributions income for the entity’s 2007‑2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007‑2008 income year if the contributions concerned had been made in the entity’s 2007‑2008 income year. (2) Division 301 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section because you are a member of the fund in the same way as it would apply if the payments were superannuation member benefits paid to you from a complying superannuation fund. For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. Subdivision 301‑F of the Income Tax Assessment Act 1997 applies in relation to income years starting on or after 1 July 2007. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to the following in respect of an income year that starts on or before 1 July 2021: (b) the amendments of the Income Tax Assessment (1997 Act) Regulations 2021 made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023. (a) a superannuation benefit (the trigger benefit) was paid to a person in the 2020‑21 income year or an earlier income year; and (c) the trigger benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; and (2) The Commissioner cannot amend an assessment on the basis that a superannuation benefit paid to the person is a superannuation income stream benefit because of the amendments made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 if: (iii) the superannuation benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (a) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (b) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. (1) The Minister may, by legislative instrument, make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions) that: (a) relate to the amendments or repeals made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023; and (2) Without limiting subsection (1), rules made under this section before the end of the period of 12 months starting on the day that Schedule commences may provide that provisions of that Schedule, or any other Act or instrument, have effect with any modifications prescribed by the rules. Those provisions then have effect as if they were so modified. (2) Division 302 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section after another person’s death, because the other person was a member of that fund, in the same way as it would apply if the payments were superannuation death benefits paid to you from a complying superannuation fund. For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if: (b) just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. (2) For the purposes of Subdivision 82‑B of Division 82, Division 302 and section 303‑5 of the Income Tax Assessment Act 1997, the definition of death benefits dependant in section 302‑195 of that Act applies as if paragraphs (a) and (b) of the definition were replaced with the following paragraphs: (a) a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008 or a person who was formerly such a spouse; or (b) a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008, who is aged less than 18. (ii) a superannuation guarantee payment, a small superannuation account payment, an unclaimed money payment, a superannuation co‑contribution benefit payment or a superannuation annuity payment. (2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you at a time in the period: (i) a condition of release specified in item 107A or 207AA of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; or (ii) a condition of release specified in item 109AA of the table in Schedule 2 to the Retirement Savings Accounts Regulations 1997. (1) This section applies to a superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with section 292‑80B. (2) The superannuation benefit is not assessable income and is not exempt income to the extent that it does not exceed the amount mentioned in subsection (3). (3) The amount is the amount of excess non‑concessional contributions stated in the release authority in accordance with paragraph 292‑80A(3)(a), reduced (but not below zero) by the amount of any superannuation benefit that was not assessable income and not exempt income under a previous operation of subsection (2) in relation to the release authority. (4) The superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3). (a) you have an interest in a FIF (within the meaning of Part XI of the Income Tax Assessment Act 1936, as in force just before the commencement of item 37 of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010) (the paying fund); and (b) Subdivision 305‑B of the Income Tax Assessment Act 1997 applies in relation to the paying fund (see section 305‑55 of that Act); and (c) the paying fund transfers an amount to a complying superannuation fund in respect of you during the deduction year; and (d) you choose under section 305‑80 of the Income Tax Assessment Act 1997 that the amount, or part of the amount, is to be treated as assessable income of the complying superannuation fund; and (e) immediately before the transfer happens, there is a post‑FIF abolition surplus (within the meaning of the Income Tax Assessment Act 1936) for the paying fund in relation to you; and For the purposes of the definition of specified roll‑over amount in the Income Tax Assessment Act 1997, treat the taxable component of a directed termination payment (within the meaning of section 82‑10F) as the element untaxed in the fund of a superannuation benefit that is a roll‑over superannuation benefit. (1) This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007. > Note: This section also applies to an income stream replacing an earlier one because of an involuntary roll‑over (see section 307‑127). (2) Despite subsection 307‑125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows: (a) first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007); (b) next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits. The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit. (3) Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened: (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day; (ba) the holder of the superannuation interest is aged 60 or above on 1 July 2007, if none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day. (a) treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and (b) work out the tax free component of the superannuation interest for the purposes of section 307‑125 of the Income Tax Assessment Act 1997 under subsections (6) and (6A). (i) an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and (ii) the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time; (b) next, work out the unused undeducted purchase price (within the meaning of paragraph (a) of the definition of that term in subsection 27A(1) of the Income Tax Assessment Act 1936 just before the commencement of this section, and disregarding paragraphs (b) and (c) of that definition) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007; (c) next, work out the pre‑July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this section) of the eligible termination payment. (a) at least one superannuation income stream benefit was paid from the superannuation income stream before 1 July 1994; or (b) section 27AAAA of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007) applied to the superannuation income stream just before 1 July 2007; (7) For the purposes of paragraph (6)(c), disregard the value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment. (8) If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as: (b) if 1 or more other events mentioned in subsection (3) happened before the commutation—the time just before the earliest of those events happens. (a) references in that section to the later income stream (in relation to a time, or event happening, before the payment of that involuntary roll‑over superannuation benefit) include references to the earlier income stream; and (b) references in that section to the superannuation interest supporting the later income stream (in relation to a time, or event happening, before the payment of that benefit) include references to the earlier interest. (1) This section applies for the purposes of working out the amount of your total superannuation balance just before 1 July 2017. (2) The transfer balance mentioned in paragraph 307‑230(1)(b) of the Income Tax Assessment Act 1997 just before 1 July 2017 is taken to be equal to: (a) the sum of the transfer balance credits (if any) in your transfer balance account just after the start of 1 July 2017; less (b) the sum of the transfer balance debits (if any) arising in your transfer balance account on 1 July 2017 under item 4 of the table in subsection 294‑80(1) of that Act (about payment splits). (1) Section 307‑231 of the Income Tax Assessment Act 1997 applies in relation to borrowings that arise under contracts entered into on or after 1 July 2018. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2018 is treated as if it arose under a contract entered into before 1 July 2018 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) treat a deduction made under former section 279 of the Income Tax Assessment Act 1936 as having been made under section 295‑465 of the Income Tax Assessment Act 1997 instead; and (b) treat a deduction made under former section 279B of the Income Tax Assessment Act 1936 as having been made under section 295‑470 of the Income Tax Assessment Act 1997 instead. If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007‑2008 income year is, despite subsection 307‑345(1), the total of: (b) the amount by which $140,000 exceeds the upper limit for the 2006‑2007 income year (worked out under section 159SG of that Act). Division 316 of the Income Tax Assessment Act 1997 applies in relation to demutualisations occurring on or after 1 July 2008. If: (a) any assets held by the benefit funds of a life insurance company that is a friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a complying superannuation fund; and (b) the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer; the transfer is disregarded for any purposes of the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936. (1) In working out the amount that a life insurance company can deduct, in respect of life insurance policies that are disability policies (other than continuous disability policies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income. (2) In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection (1) applies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company’s liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320‑85(4) of that Act. If: (2) If the life insurance company wishes to include a part of an approved asset in its virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑87(2) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society establishes a virtual PST in the 2000‑01 income year, the calculation of the transfer values of the company’s virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year. (1) Subsection (3) applies for the purposes of subparagraph (b)(i) of the definition of virtual PST life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 259 of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007. (2) Subsection (3) also applies for the purposes of subparagraph (b)(i) of the definition of complying superannuation/FHSA life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 47 of Schedule 7 to the First Home Saver Accounts (Consequential Amendments) Act 2008. (3) Treat an annuity as having been purchased out of a superannuation lump sum or an employment termination payment, if the annuity was purchased: (b) out of an eligible termination payment (within the meaning of the Income Tax Assessment Act 1997, as in force just before the commencement mentioned in subsection (1) of this section). (2) If the life insurance company wishes to include a part of an approved asset in its segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (a) a life insurance company had a liability before 1 July 2000 under a life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and (c) there is a transfer of the company’s assets to the segregated exempt assets to meet that liability or that part of the liability; (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑105(1) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320‑225 of the Income Tax Assessment Act 1997 in the 2000‑01 income year, the calculation of the transfer values of the company’s segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year. Section 322‑25 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Part VC of the Insurance Act 1973 after 17 October 2008. 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you > new Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force after the commencement of this section. > old Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. > STS taxpayer means an STS taxpayer within the meaning of Division 328 of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. #### 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years (1) This section applies for the purpose of working out whether you are a small business entity (other than because of subsection 328‑110(4) of the Income Tax Assessment Act 1997) for the 2007‑08 or 2008‑09 income year. (2) You work out your aggregated turnover for the 2005‑06 or 2006‑07 income year as if the amendments made by Schedule 1 to the Tax Laws Amendment (Small Business) Act 2007 had been in force in relation to that year. (a) your aggregated turnover for the 2005‑06 income year (worked out in accordance with subsection (2)) is $2 million or more; but (b) your STS group turnover for that year (worked out under Subdivision 328‑F of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section) is less than $2 million. (2) The following provisions apply as if you are a small business entity for the income year in which you are winding up the business: #### 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you (1) For the purpose of working out whether you are a small business entity for the 2007‑08, 2008‑09, 2009‑10 or 2010‑11 income year (each a relevant income year) for the purposes of a provision to which subsection (3) applies: (2) An entity (the first entity) controls a discretionary trust for a relevant income year if, for any of the 4 income years (a previous income year) before that year: (a) if the previous income year is before the 2007‑08 income year—the trustee of the trust made a distribution of $100,000 or more to the first entity, any of its affiliates, or the first entity and any of its affiliates; or (i) the trustee of the trust paid to, or applied for the benefit of, the first entity, any of the first entity’s affiliates, or the first entity and any of its affiliates, any of the income or capital of the trust; and (ii) the percentage (the control percentage) of the income or capital paid or applied is at least 40% of the total amount of income or capital paid or applied by the trustee for that year. (1) This section sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (2) This section also sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (3) Any ordinary income that, apart from paragraph 328‑105(1)(a) of the Income Tax Assessment Act 1997 (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have derived before the changeover year (while you were using the STS accounting method) and you have not included in your assessable income because you have not received it is included in your assessable income for the changeover year. (4) Any general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, that, apart from paragraph 328‑105(1)(b) of that Act (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have incurred before the changeover year (while you were using the STS accounting method) and that you have not deducted because you have not paid them can be deducted for the changeover year. (b) for any later income year for which you are a small business entity but only if you used the STS accounting method for the income year before that later year. > Note: Example: You are a small business entity for the 2007‑08 and 2008‑09 income years and you continue to use the STS accounting method for those years. You are not a small business entity for the 2009‑10 income year so you cannot continue to use the STS accounting method for that year. Because you cannot use the STS accounting method for the 2009‑10 income year, you will not be able to use it again for a later income year even if you are a small business entity for that later year. In sections 328‑115 and 328‑120, STS accounting method means the accounting method that was required by the Income Tax Assessment Act 1997 to be used by STS taxpayers for the 2004‑05 income year. (b) you made a choice under subsection 328‑175(3) of old Subdivision 328‑D in relation to a depreciating asset you use to carry on a primary production business and for which you could deduct amounts under Subdivision 40‑F or 40‑G of the Income Tax Assessment Act 1997. (2) In determining whether you can choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997 in an increased access year, disregard subsection 328‑175(10) of that Act. (3) In applying paragraph 328‑175(10)(b) of that Act for the purpose of determining whether you can choose to use that Subdivision in any income year after the increased access years, disregard: (4) Paragraph 328‑180(1)(b) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that paragraph to $1,000: (i) first used the asset, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (i) first used the asset, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (i) first used the asset, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, on or after 1 July 2023 and on or before 30 June 2026. (a) a reference in that paragraph to the end of the income year in which you start to use the asset, or have it installed ready for use, for a taxable purpose were a reference to the earlier of: if: (i) first used the asset, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021. (5) Paragraph 328‑180(2)(a) or (3)(a) of the Income Tax Assessment Act 1997 applies to an amount included in the second element of the cost of an asset as if a reference in that paragraph to $1,000: (5A) For the purposes of determining whether, under subsection 328‑180(2) of the Income Tax Assessment Act 1997, you can deduct, for an income year (the current year), the taxable purpose proportion of an amount included in the second element of the cost of an asset, disregard paragraph (b) of that subsection if: (2) For the purposes of determining whether subsection 328‑180(1) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (b) of that subsection (which sets a limit of $1,000 on the cost of the asset) if, in the period beginning at the 2020 budget time and ending on 30 June 2023, you: (3) For the purposes of determining whether subsection 328‑180(2) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (a) of that subsection (which sets a limit of $1,000 on the amount) if the amount is included in the second element of the cost of the asset at any time in the period beginning at the 2020 budget time and ending on 30 June 2023. (4) In applying paragraph 328‑180(3)(a) of the Income Tax Assessment Act 1997 to an asset, disregard an amount included in the second element of the cost of the asset if the amount is deducted under subsection 328‑180(2) of that Act, as modified by subsection (3) of this section. (5) Section 328‑210 of the Income Tax Assessment Act 1997 applies as if the words “less than $1,000 but” in subsection (1) were disregarded, in relation to a deduction for an income year that ends: Subsection 328‑190(2) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that subsection to 15% were a reference to 57.5% if you are covered by section 40‑125 for the asset (which is about backing business investment). (1) A depreciating asset of yours that had been allocated to your general STS pool is treated as being allocated to your general small business pool. (2) A depreciating asset of yours that had been allocated to your long life STS pool is treated as being allocated to your long life small business pool. (3) If you made a choice, under subsection 328‑185(5) of old Subdivision 328‑D, not to have a depreciating asset allocated to your long life STS pool, the choice has effect for the purposes of subsection 328‑185(5) of new Subdivision 328‑D. (1) This section applies if a depreciating asset of yours is treated as being allocated to your general small business pool or long life small business pool under section 328‑185. (2) The opening pool balance of your general small business pool or long life small business pool for the 2007‑08 income year is taken to be the closing pool balance of your general STS pool or long life STS pool, as the case requires, for the 2006‑07 income year, reduced or increased by any adjustment required under section 328‑225 of new Subdivision 328‑D (about change in the business use of an asset). (a) you were not an STS taxpayer for the 2006‑07 income year (because you stopped being an STS taxpayer before that time); but (b) you are a small business entity for the 2007‑08 income year or a later income year and you choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets for that income year; the opening pool balance of your general small business pool or long life small business pool includes the sum of the taxable purpose proportions of the adjustable values of depreciating assets allocated to the pool under subsection 328‑185(3) of new Subdivision 328‑D for that year. (1) This section applies for the purposes of applying Subdivision 328‑D of the Income Tax Assessment Act 1997 for the 2012‑13 income year and later income years. (2) A depreciating asset that had been allocated to your long life small business pool is treated as being allocated to your general small business pool. (a) the closing pool balance of your general small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under section 328‑225 of that Act; and (b) the closing pool balance of your long life small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under that section. (1) This section applies if you chose to stop being an STS taxpayer for the 2005‑06 income year or the 2006‑07 income year. (2) You cannot choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets until at least 5 years after the income year for which you chose to stop being an STS taxpayer. > Note: Subdivision 328‑D of the Income Tax Assessment Act 1997 continues to apply to depreciating assets that have been allocated to your small business pools even if you are not a small business entity, or do not choose to use that Subdivision, for an income year: see section 328‑220 of that Subdivision. (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct 20% of particular expenditure for your 2023‑24 income year if: (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (d) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑450 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (6) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (ii) if the provider is a registered body of a kind listed in paragraph (2)(b), (c) or (d)—the training is within the provider’s scope of registration for that kind of registered body; and (d) each enrolment, or arrangement, for the provision of the training is made or entered into at or after 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022; and > Note: Paragraphs (b) and (c) mean this section will not apply to expenditure for on‑the‑job training or training provided by you in house. (a) a registered higher education provider (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); (b) a NVR registered training organisation (within the meaning of the National Vocational Education and Training Regulator Act 2011); (c) a registered education and training organisation (within the meaning of the Education and Training Reform Act 2006 (Vic.)); (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct for your 2023‑24 income year an amount that is equal to the sum of: (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (3) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑460 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (4) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (b) you incur the expenditure in the period starting at 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022 and ending at the end of: (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (4) For the purposes of paragraphs (1)(c) and (2)(c), in working out whether you can deduct an amount of expenditure on a depreciating asset, assume that: (b) throughout that effective life, you will use the asset for a taxable purpose to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose. (a) 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑470(1) or (3) applies in relation to the income year; and > Note: The deduction relates to the period of 1 July 2023 to 30 June 2024. An entity may have deducted an amount under paragraph (a) for a previous income year if the entity has a substituted accounting period. (2) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑470 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (3) Sections 8‑10, 40‑215 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (c) you start to use the asset, or have it installed ready for use, for any purpose after 30 June 2023 but before 1 July 2024; and (d) you start to use the asset, or have it installed ready for use, for a taxable purpose at a time (the start time) that is: (e) you are a small business entity, or an entity covered by subsection (4), for the income year that includes the start time; and (h) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) a new reasonably comparable depreciating asset that uses a fossil fuel (other than a use of which that is merely incidental) is available in the market at the start time; (ii) if the asset is being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than the other asset; (iii) if the asset is not being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than a new reasonably comparable depreciating asset that is available in the market at the start time; or (i) a depreciating asset (other than an asset excluded under subsection (6)) that uses electricity, or energy that is generated from a renewable source, to be more energy efficient; (iv) the use of electricity, or energy that is generated from a renewable source, by another depreciating asset to be monitored. (a) the amount is included in the second element of a depreciating asset’s cost under paragraph 40‑190(2)(a) of the Income Tax Assessment Act 1997; and (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (d) you are a small business entity, or an entity covered by subsection (4), for the income year in which the expenditure is incurred; and (i) if the asset could use a fossil fuel (other than a use of which that is merely incidental)—the asset to only use electricity, or energy that is generated from a renewable source; (ii) if the asset uses electricity, or energy that is generated from a renewable source—the asset to be more energy efficient; (g) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) For the purposes of paragraph (1)(b) or (3)(b), in working out whether you can deduct an amount of expenditure assume that: (i) for the purposes of paragraph (1)(b)—to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose; or (ii) for the purposes of paragraph (3)(b)—to the same extent as you use it for a taxable purpose in the income year in which the expenditure is incurred. (b) expenditure (other than expenditure referred to in subparagraph (3)(e)(i)) on an asset that can use a fossil fuel (other than a use of which that is merely incidental); (c) an asset that solely or predominantly generates electricity from a renewable source (for example, photovoltaic cells) or expenditure on such an asset; (d) an asset, or expenditure, being capital works for which you can deduct an amount under Division 43 of the Income Tax Assessment Act 1997; > Note: Subsections (1) and (3) also do not apply to an item of trading stock because such an asset is not a depreciating asset: see section 40‑30 of the Income Tax Assessment Act 1997. A reference in each of the following provisions of the Income Tax Assessment Act 1997 to a registration under section 27A of the Industry Research and Development Act 1986 includes a reference to a registration under former section 39J of that Act: (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) the R&D entity cannot deduct an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from: (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D entity could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:22pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the R&D entity is taken to be able to deduct under subsection 355‑315(2) of the new Act that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the R&D entity’s assessable income for the event year under subsection 355‑315(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 for the asset, the R&D entity is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑446 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the R&D entity is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑465 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: Section 355‑315 of the new Act would otherwise apply for the event in a case where the R&D entity had new law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by an R&D partnership; and (i) the partner can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the partner chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D partnership could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the partner is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:21.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D entity</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D partnership</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the partner is taken to be able to deduct under subsection 355‑525(2) of the new Act the partner’s proportion of that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the partner’s assessable income for the event year under subsection 355‑525(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partner’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if one or more partners (including the partner) in the R&D partnership is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset, the partner is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑448 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the partner is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑467 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s deductions under section 355‑520 of the new Act mentioned in subsection (4A) of this section. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the partner for the event, do so apply to the partner for the event. > Note 1: Section 355‑525 of the new Act would otherwise apply for the event in a case where the partner had new law deductions. Item 7 of the table in subsection 57‑110(2) in Schedule 2D to the Income Tax Assessment Act 1936 applies as if the deduction rules set out in the final column of that item also included former sections 73BA and 73BH of the Income Tax Assessment Act 1936. For the purposes of step 1 of the method statement in subsection 355‑415(2) of the Income Tax Assessment Act 1997, also disregard amounts that have already been taken into account under former subsection 73B(14AA) of the Income Tax Assessment Act 1936 for the R&D entity, the grouped entity and the R&D activities for an earlier income year. (1) This section applies if, apart from former paragraph 73B(10)(a) of the Income Tax Assessment Act 1936, an eligible company could deduct advance R and D expenditure in one or more income years commencing on or after 1 July 2011. > Note: That deduction would be under former section 73B of that Act as that former section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (a) apart from Subdivision H (prepaid expenditure) of Division 3 of Part III of the Income Tax Assessment Act 1936, an eligible company can deduct an amount under former section 73B, 73BA, 73BH, 73QA, 73QB or 73Y of that Act for an income year commencing before 1 July 2011; and (c) apart from former paragraph 73B(10)(a) of that Act, the eligible company could deduct an amount, as a result of that application of that Subdivision, for an income year commencing on or after 1 July 2011. > Note: That deduction would be under that Act as it applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (3) Former paragraph 73B(10)(a) of that Act is taken to apply to those income years commencing on or after 1 July 2011 as if the reference in that former paragraph to section 39J of the Industry Research and Development Act 1986 were a reference to section 27A of that Act. (4) An expression used in this section that is also used in former section 73B of the Income Tax Assessment Act 1936 has the same meaning in this section as it has in that former section. This Subdivision applies to core technology (within the meaning of former section 73B of the Income Tax Assessment Act 1936) if: (a) you incurred core technology expenditure (within the meaning of that former section) in an income year commencing before 1 July 2011 in relation to the core technology under one or more contracts entered into at or after the time referred to in former subsection 73B(12) of that Act; and (b) that expenditure (the undeducted expenditure) cannot be deducted for the last income year commencing before 1 July 2011. (1) This section applies for the purposes of Division 40 of the Income Tax Assessment Act 1997, other than sections 40‑292 and 40‑293 of that Act, if the core technology (the asset) is a depreciating asset. (2) Disregard this section, including its effect on the amount you can deduct under section 40‑25 of that Act for the asset, for the purposes of working out: (3) The asset’s opening adjustable value for the first income year that commences on or after 1 July 2011 (the first new income year) is equal to the amount of the undeducted expenditure. (4) Subsection 40‑75(2) of the Income Tax Assessment Act 1997 applies to the asset as if the first new income year were a change year (within the meaning of that subsection). If the core technology is not a depreciating asset, you can deduct the undeducted expenditure in equal proportions over a period of 5 income years starting in the first income year commencing on or after 1 July 2011. To work out the film component (if any) of your tax loss for the 1997‑98 income year or a later income year, apply former section 375‑805 of the Income Tax Assessment Act 1997. If you incurred a film loss for the purposes of former section 79F (Film losses of 1989‑90 to 1996‑97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989‑90 to 1996‑97 income years, that film loss is the film component of your tax loss for that income year. (1) To work out your film loss (if any) for the purposes of the Income Tax Assessment Act 1997 for the 1989‑90 or a later income year, apply former section 375‑810 of that Act. (2) You can deduct in the 1997‑98 or a later income year your film loss for any of the 1989‑90 to 1996‑97 income years only to the extent that it has not already been deducted. (1) Division 392 of the Income Tax Assessment Act 1997 applies to assessments for the 1998‑99 income year and later income years. (a) it had applied to your assessment for each income year before the 1998‑99 income year for which Division 16 of Part III of the Income Tax Assessment Act 1936 applied in relation to your income; and (b) you had carried on a primary production business during each income year before the 1998‑99 income year when you carried on a business of primary production; and (c) for each income year before the 1998‑99 income year you had a basic taxable income equal to your taxable income for the income year for the purposes of Division 16 of Part III of the Income Tax Assessment Act 1936. > Note: Section 149A of the Income Tax Assessment Act 1936 identifies what your taxable income for an income year is for the purposes of Division 16 of Part III of that Act. Division 392 of the Income Tax Assessment Act 1997 does not apply to your assessment for the 1998‑99 income year or a later income year if you made an election under section 158A (Election that Division not apply) of the Income Tax Assessment Act 1936 relating to an income year before the 1998‑99 income year. 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 A reference in Division 393 of the Income Tax Assessment Act 1997 to a deduction under section 393‑5 of that Act for making a farm management deposit is taken to include a reference to a deduction under section 393‑10 in Schedule 2G to the Income Tax Assessment Act 1936, as in force just before the commencement of this section, if the deposit was made before the 2010‑11 income year. #### 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 (b) the deposit was made with an FMD provider as a result of a request to which section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, applied; the unrecouped FMD deduction in respect of the deposit at that time is equal to the amount of the unrecouped deduction (within the meaning of the former subsection 159GA(3) of the Income Tax Assessment Act 1936) in respect of the deposit immediately before it ceased to be a deposit under the Loan (Income Equalization Deposits) Act 1976. > Note: This means that the unrecouped deduction relating to the deposit under the Loan (Income Equalization Deposits) Act 1976 continues to apply (by becoming an unrecouped FMD deduction) when the deposit is transferred to an FMD provider as a farm management deposit. The Loan (Income Equalization Deposits) Act 1976 was repealed on 22 February 2005. If a beneficiary of a trust was covered by paragraph (c) of the definition of primary producer in section 393‑25 in Schedule 2G to the Income Tax Assessment Act 1936 in the 2009‑10 income year, treat subsection 393‑25(3) of the Income Tax Assessment Act 1997 as having applied to the beneficiary for the purpose of determining the maximum number of choices that the trustee may make under subsection 393‑27(2) of that Act for the 2010‑11 income year. (a) a farm management deposit of an owner was unclaimed moneys for the purposes of section 69 of the Banking Act 1959; and (2) For the purpose of subsection 393‑10(1) of the Income Tax Assessment Act, treat the repaid unclaimed moneys as a repayment of the deposit of the owner. (3) To avoid doubt, the payment of unclaimed moneys to the Commonwealth under section 69 of the Banking Act 1959 is not a repayment of the deposit of the owner for the purposes of Division 393 of the Income Tax Assessment Act 1997. 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 #### 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 If a farm management deposit was made with an FMD provider as a result of a request under section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, then: (a) subsections 393‑40(1) to (4) of the Income Tax Assessment Act 1997 apply as if the day the deposit was made was the day on which the deposit was originally made under the Loan (Income Equalization Deposits) Act 1976; and (1) A copyright collecting society to which section 51‑43 of the Income Tax Assessment Act 1997 applies, may elect that, from 1 July 2004, the section apply to all ordinary income, and statutory income, collected or derived by the society on or after 1 July 2004. Division 420 of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division. Subdivision 615‑C of the Income Tax Assessment Act 1997 applies to you with the modifications set out in this Subdivision if you chose to obtain a roll‑over involving \*shares or units that: (b) were your trading stock, or revenue assets, at the time immediately before that disposal, redemption or cancellation. (1) Disregard subparagraph 615‑45(a)(ii), and paragraph 615‑45(b), of the Income Tax Assessment Act 1997 if the roll‑over relates to \*shares that were disposed of, redeemed or cancelled. (2) For each of the \*shares in the interposed company that you acquired in return for those of your shares or units in the original entity that were your \*trading stock at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  (2) For the purpose of calculating any profit or loss on a future disposal, cessation of ownership, or other realisation of a \*share in the interposed company that you acquired in return for those of your shares or units in the original entity that were \*revenue assets at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  Subdivision 620‑A of the Income Tax Assessment Act 1997 applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. (1) Part 3‑90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Act (No. 1) 2002 and amended by: (2) Section 713‑50 of the Income Tax Assessment Act 1997 (about factors to consider in determining destination of distribution by non‑fixed trust) applies for the purposes of this Part in the same way as it applies for the purposes of Part 3‑90 of that Act. ### Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly‑owned subsidiary of the entity (the future head company) that became the head company of the group; or (ii) at some time during that period, the entity was a wholly‑owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (ii) it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (1) If a group is a transitional group, its head company may, subject to subsection (3), choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (3) If the choice is to be made after the end of the period mentioned in paragraph (2)(a) and before the end of the day mentioned in paragraph (2)(b), it cannot be made unless each entity in relation to which the conditions in subsection (5) are satisfied has agreed to it being made. (a) the entity (the leaving entity) ceased to be a subsidiary member of the group before the choice was made (in a subsection (3) case) or before the revocation took place (in a subsection (4) case); and (b) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; and (c) the asset had become that of the head company because that section applied when a chosen transitional entity (whether or not the same entity as the leaving entity) became a subsidiary member. Section 716‑855 applies for the purposes of this Division in the same way as that section applies for the purposes of Part 3‑90 of the Income Tax Assessment Act 1997. is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705‑B of that Act and with this Division. 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity Section 701‑10 (cost to head company of assets of joining entity) and subsection 701‑35(4) (setting value of trading stock at tax‑neutral amount) of the Income Tax Assessment Act 1997 do not apply to the assets of a chosen transitional entity. > Note: The fact that the head company inherits the entity’s history under section 701‑5 of that Act when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time. #### 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities (2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non‑chosen subsidiary) is worked out in a special way. (b) for each sub‑group (see subsection (6)) that exists in relation to the non‑chosen subsidiary—the sub‑group’s notional allocable cost amount (see subsection(5)) for the non‑chosen subsidiary. (4) The head company adjusted allocable amount for the non‑chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if; (b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of head company’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub‑group in relation to the non‑chosen subsidiary. (5) For each sub‑group that exists in relation to the non‑chosen subsidiary, there is a sub‑group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non‑chosen subsidiary if: (a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non‑chosen subsidiary and the entities comprising the sub‑group; and (c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub‑group membership interests (see subsection (6)) in relation to the sub‑group, and any such entity held those membership interests during the period when it actually held them; and (d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of chosen transitional entity’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub‑group. (6) If a chosen transitional entity holds membership interests in a non‑chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non‑chosen subsidiary: (a) the chosen transitional entity and each interposed non‑chosen subsidiary comprise a sub‑group in relation to the non‑chosen subsidiary (unless the non‑chosen subsidiary is included in a sub‑group in relation to another non‑chosen subsidiary); and (i) the membership interests that the chosen transitional entity holds directly in the non‑chosen subsidiary or in any of the interposed non‑chosen subsidiaries; (ii) the membership interests that each interposed non‑chosen subsidiary holds directly in the non‑chosen subsidiary or in any of the other interposed non‑chosen subsidiaries. #### 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities If any provision of the Income Tax Assessment Act 1997 would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply. > Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred. (1) This section has effect for the purposes of applying section 705‑70 (step 2 of allocable cost amount) of the Income Tax Assessment Act 1997 in relation to a transitional entity. (2) In spite of subsection 705‑70(1A) of that Act, if the amount of an accounting liability of the transitional entity would be different when it becomes an accounting liability of the transitional group, that difference is not taken into account in working out the amount of the liability. #### 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different (a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset (the roll‑over asset) for which there was: (ii) roll‑over relief under section 40‑340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and (i) became an asset of the head company when the transitional group came into existence because subsection 701‑1(1) (the single entity rule) of that Act applies; or differs at that time from what it would have been if the act, transaction or event that gave rise to the CGT event had not occurred in relation to the roll‑over asset; then the provisions mentioned in subsection (2) apply as if the act, transaction or event had not occurred in relation to the roll‑over asset. (a) the act, transaction or event mentioned in subsection (1) happened before a demerger and in connection with the demerger; and (b) before the transitional group came into existence, at least one of the following entities ceased to be a member of the demerger group because of the demerger: (i) the originating company in relation to the roll‑over, or the transferor in relation to the roll‑over relief, was a foreign resident; and (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as a transitional foreign‑held subsidiary of the group. #### 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets (1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied. (2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset. (a) the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and (b) former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset. (4) The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group. (6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses. #### 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets (b) just before the transitional group came into existence, the entity that became the head company held a pre‑CGT asset; and (d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre‑CGT asset and is held by the head company only because the entity is taken by subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company. (2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence. #### 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity (1) This section provides for an addition to the step 1 amount for working out under section 711‑20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity) that ceases to be a subsidiary member of the transitional group at a time (the leaving time), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701‑1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount for paragraph</span><span> </span><span>(2)(c)</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">If, because of the circumstances described in paragraphs</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(a) and (b):</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">The amount is:</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:180.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following provisions applied to the entity:</span></p><p class="Tablea"><span>(a) former section</span><span> </span><span>61A of the </span><span style="font-style:italic">Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(b) former Subdivision</span><span> </span><span>57</span><span>‑</span><span>I in Schedule</span><span> </span><span>2D to the</span><span style="font-style:italic"> Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(c) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(4) of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td><td style="width:148.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the amount treated as being the cost of the asset under that provision; and</span></p><p class="Tablea"><span>(b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>2</span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following subsections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span><span> applied to the entity:</span></p><p class="Tablea"><span>(a) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(5);</span></p><p class="Tablea"><span>(b) 58</span><span>‑</span><span>70(3)</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The amount treated as being the cost, or the first element of the cost, of the asset under that subsection</span></p></td></tr></tbody></table> ``` (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997, as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="4" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amounts and provisions for different dates of acquisition</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Date of the acquisition</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Amount</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Provision of Division</span><span style="font-weight:bold"> </span><span style="font-weight:bold">58 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> applying to the acquisition and the working out of the amount</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:76.7pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>160</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>220</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>After 30</span><span> </span><span>June 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>First element of the cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subsection</span><span> </span><span>58</span><span>‑</span><span>70(5)</span></p></td></tr></tbody></table> ``` > Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. > Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and ### Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: #### 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70‑45 to 70‑70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420‑51 to 420‑58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (a) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority‑owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority‑owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority‑owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority‑owned entity became a subsidiary member of the group, there was roll‑over relief under section 40‑340 of the Income Tax Assessment Act 1997. (a) while the asset is, because subsection 701‑1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, its tax cost setting amount is taken to be equal to the continuing majority‑owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711‑30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997. (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset becomes that of an entity (a new asset holder) other than the head company because subsection 701‑1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder) acquiring some or all of the membership interests in the new asset holder; and (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset is acquired by another entity (a new asset holder) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll‑over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value asset just before the acquisition; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 #### 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 (b) members of the consolidated group or the MEC group mentioned in subsection 104‑500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701‑1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701‑1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (3) If this section applies, neither subsection 104‑500(4) nor subsection 104‑500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year. ### Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C‑B); and (b) modifies certain rules in Part 3‑90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C‑C). > Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719‑2 and 719‑10 of this Act). 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership #### 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(ii) of that Act (see subsection 719‑2(3) of this Act). (b) a trust (a non‑resident trust) that does not meet the requirements in any item of the table in section 703‑25 of the Income Tax Assessment Act 1997. (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non‑resident company or a non‑resident trust; or Test entity must be a subsidiary member on assumption that non‑resident companies and non‑resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non‑resident company or non‑resident trust were a subsidiary member of the group. (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv). #### 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(iii) of that Act (see subsection 719‑2(3) of this Act). (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C‑10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3). If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C‑10 are met; and (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (ii) an entity that is a transitional foreign‑held indirect subsidiary of the group because of another application of this paragraph; Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign‑held indirect subsidiary would need to have satisfied the set of requirements in either section 701C‑10 or 701C‑15 (1) This Subdivision applies if an entity (the transitional foreign‑held joining entity) that is a transitional foreign‑held subsidiary or a transitional foreign‑held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time) the group comes into existence. (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign‑held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign‑held indirect subsidiary that becomes a subsidiary member at that time takes account of this. (a) section 701‑10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); apply, for the purposes of setting the tax cost of an asset of the transitional foreign‑held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign‑held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. > Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign‑held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign‑held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign‑held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign‑held subsidiary and the other entity. > Note 2: If the transitional foreign‑held joining entity is a transitional foreign‑held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705‑A of the Income Tax Assessment Act 1997, in its application in accordance with Subdivision 705‑B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company. Subsection 701‑35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax‑neutral amount) does not apply to the assets of the transitional foreign‑held joining entity if it is a transitional foreign‑held subsidiary. Section 701‑15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: (a) this section applies to each membership interest in the transitional foreign‑held subsidiary that is held by an entity (an eligible non‑resident) of a kind mentioned in subparagraph 701C‑20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign‑held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701‑1(2) of the Income Tax Assessment Act 1997 applies to the eligible non‑resident in the same way as it applies to the head company. Section 711‑5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: > Note: If the leaving entity is a transitional foreign‑held subsidiary (within the meaning of section 701C‑20 of the Income Tax (Transitional Provisions) Act 1997), this Division will, in accordance with subsection 701‑15(4) of this Act (see section 701C‑40 of the first‑mentioned Act), apply to membership interests that an eligible non‑resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity. (1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707‑C of the Income Tax Assessment Act 1997. (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period. (1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if: (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (d) the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997. (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: (1) The head company of a consolidated group may make a choice in the approved form to apply section 701D‑10 to another entity. (2) However, the head company cannot make that choice if subsection 701D‑10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (a) an asset of the head company because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701‑55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40‑77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40‑77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40‑285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount. (b) after the asset became an asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). > Note: The final entity will be different from the head company if an entity (the leaving entity) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40‑285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. > Note: The final entity will be entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701‑5 (the entry history rule) of that Act and perhaps also section 701‑40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity) became a subsidiary member of the group; and It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). > Note: In some cases, section 705‑47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40‑285(3) of this Act. If: (b) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and subsection 40‑285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701‑10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997. > Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997. (1) For the purposes of Part 3‑90 of the Income Tax Assessment Act 1997, this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960‑G of that Act whether the interest or right is a membership interest of the entity in the other entity. > Note: Under Subdivision 960‑G of the Income Tax Assessment Act 1997, a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001) apply to transactions in relation to the interest or right at the relevant time. Despite the amendments of section 703‑35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) If an entity (the joining entity) to which section 40‑75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time), this Subdivision applies in relation to: (ii) became assets of the head company of the group at the joining time because of section 701‑1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure. (1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). (2) If the joining entity could not deduct an amount under Subdivision 40‑B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701‑55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40‑35, 40‑37, 40‑40 or 40‑43 treated the joining entity as holding a notional asset. > Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705‑30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. (a) deductions under former Subdivision 330‑A, 330‑C or 330‑H of the Income Tax Assessment Act 1997, or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated an entity as holding because of the expenditure. (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); > Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40‑75(4) of this Act, but may have been reset since under Subdivision 40‑B of the Income Tax Assessment Act 1997. > Note 2: The effective life of a notional asset is specified by whichever one of sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act is relevant to the notional asset. (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (9) Section 705‑55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705‑45 of that Act. > Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705‑40 of the Income Tax Assessment Act 1997. (a) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701‑5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. > Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705‑305(3). (ii) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707‑A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member. 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value #### 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707‑320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor) other than the real loss‑maker mentioned in subsection 707‑315(1) of that Act for the bundle; and (b) both the real loss‑maker and the value donor became members of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (ca) neither the real loss‑maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (ii) a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (ii) section 713‑540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (2) It must have been possible for the real loss‑maker to have transferred the loss to the value donor under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss‑maker at the initial transfer time the amount worked out using the formula:  > Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707‑327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss‑maker to the transferee. > total of real loss‑maker’s non‑foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss‑makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) included in a bundle of losses: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. #### 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value (1) This section affects the calculation of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707‑325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936, in the bundle). > Note: This section does not affect the calculation of the real loss‑maker’s modified market value for other purposes (such as the real loss‑maker being a value donor for the purposes of another application of section 707‑325 of this Act). (3) One condition is that the event was an injection of capital directly into the real loss‑maker by the value donor mentioned in section 707‑325 of this Act. (c) that would have caused subsection 707‑325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss‑maker’s modified market value (even if no other events described in subsection 707‑325(4) of that Act had occurred), apart from this section. (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss‑maker (whether or not the event also involved either the value donor or the real loss‑maker); or (1) This section has effect for the purposes of working out under Subdivision 707‑C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707‑325, as if there were added to the modified market value of the real loss‑maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (c) the loss is not a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707‑A of that Act at the initial transfer time had the company: > Note: This section has effect even if the amount added to the real loss‑maker’s modified market value under section 707‑325 is nil because the value donor’s modified market value is nil. (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707‑325, as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (4) If the transferee mentioned in subsection 707‑325(1) chooses, sections 707‑310, 707‑335 (except paragraph 707‑335(2)(a)) and 707‑340 of the Income Tax Assessment Act 1997 (and subsections 707‑315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: > Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707‑325(1)(d) and (e) and subsection 707‑325(2) in an application of section 707‑325 separate from the application of that section mentioned in paragraph (1)(a) of this section. > Note: This means that a loss that provided a basis for section 707‑325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. (b) in connection with the requirement that it must have been possible for a company (the notional transferor) to transfer to another company (the notional transferee) for an income year a loss under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997. (b) ends immediately after the initial transfer time mentioned in subsection 707‑320(1) of the Income Tax Assessment Act 1997. > Note: For the purposes of identifying the trial year using the definition in section 707‑120 of the Income Tax Assessment Act 1997, the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time. (1) Subsection (3) of this section affects the calculation, under section 707‑325 of the Income Tax Assessment Act 1997 and section 707‑325 of this Act, of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (the formation time) the group became a consolidated group; and (b) the provisions described in subsection 707‑327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707‑327(1)(b) and (c) of this Act as if the bundle included the loss; and (d) subsection 707‑325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707‑325(1) of this Act chooses that this section apply in relation to the real loss‑maker. (2) Section 707‑325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. (3) Disregard for the purposes of subsection 707‑325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707‑325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or > Note: Disregarding such an event could have a direct or indirect effect on the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss‑maker’s modified market value calculated under section 707‑325 of the Income Tax Assessment Act 1997, if the real loss‑maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707‑325 of this Act to add an amount to the real loss‑maker’s modified market value for those purposes. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) that: (b) was transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from an entity other than the real loss‑maker. (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997. Disregard an event that is described in subsection 707‑325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707‑325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004. (1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss‑maker) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time) the transferee became the head company of a consolidated group; and (ii) the conditions in one or more of paragraphs 165‑15(1)(a), (b) and (c) did not exist in relation to the real loss‑maker; and (da) the real loss‑maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non‑transferred losses) of the same sort that the transferee made without a transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non‑transferred losses). (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. <table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Limit on utilising the losses</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For this income year:</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the losses that the transferee may utilise cannot exceed:</span></p></td></tr></thead><tbody><tr><td style="width:20.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:120.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The first income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span style="font-size:8pt; vertical-align:2pt">1</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The second income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) </span><span style="font-size:8pt; vertical-align:2pt">2</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the amount of the losses utilised for the income year mentioned in item</span><span> </span><span>1</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The third income year ending after the initial transfer time, or a later income year</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time</span></p></td></tr></tbody></table> ``` (4) Subdivision 707‑C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707‑A of that Act. > Note: This has 2 effects. First, Subdivision 707‑C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707‑A of that Act). (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). (7) This section does not limit the transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company. In working out when a choice may be made under subsection 707‑325(5), 707‑327(5), 707‑328A(4) or 707‑350(5), ignore losses to which section 713‑535 of the Income Tax Assessment Act 1997 applies. > Note: That section deals with losses transferred under Subdivision 707‑A of that Act from certain wholly‑owned subsidiaries of life insurance companies that are members of a consolidated group. Section 707‑405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act. (1) This section reduces the adjustable value of a notional asset that section 40‑35, 40‑37, 40‑38, 40‑40 or 40‑43 treats the head company of a consolidated group as holding, if: (b) that section treats the leaving entity as holding a notional asset because of section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997. > Note: Section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time. The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences. (1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event) happening involving an entity (the originating entity) and another entity (the recipient entity) if: (a) the event occurs in connection with a life insurance company (the member life insurance company) becoming a member of a consolidated group; and (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest) in a company or in another trust. (a) a life insurance company transfers an asset (also the original asset) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320‑200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset) to its segregated exempt assets where, apart from this Subdivision, section 320‑255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event) is made in connection with the life insurance company (also the member life insurance company) becoming a member of a consolidated group. (1) This Subdivision applies only if the originating entity (for a section 713‑505 case) or the life insurance company (for a section 713‑510 case) chooses that it apply. (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713‑510 of the Income Tax Assessment Act 1997; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713‑510 of the Income Tax Assessment Act 1997; and (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs. This Act, and the Income Tax Assessment Act 1997, apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group. (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain) that the originating entity would have made as a result of the deferral event is disregarded; and (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount) under paragraph 320‑15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (1) This section operates if, after the deferral event happens, another event (the new event) happens where the new event is: (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (i) the original asset being transferred to or from the company’s virtual PST under section 320‑180, 320‑185 or 320‑195 of the Income Tax Assessment Act 1997; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320‑235, 320‑240 or 320‑250 of that Act; or (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. > Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713‑505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (1) For a section 713‑505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713‑535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: (a) an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group at a time (the leaving time); and (b) but for the cessation of membership and section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision. Sections 716‑340 and 716‑345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. <table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:345.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Extended operation of sections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 1</span><br><span style="font-weight:bold">Sections</span><span style="font-weight:bold"> </span><span style="font-weight:bold">716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">340 and 716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">345 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> operate in relation to:</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 2</span><br><span style="font-weight:bold">In the same way as they operate in relation to:</span></p></td></tr></thead><tbody><tr><td style="width:5.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:161.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>46</span><span>‑</span><span>90 of that Act</span></p></td><td style="width:156.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>40</span><span>‑</span><span>455 of that Act</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software pool created under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure allocated to a software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Software, expenditure on which was in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>In</span><span>‑</span><span>house software, expenditure on the development of which is allocated to a software development pool</span></p></td></tr></tbody></table> ``` (1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: Section 703‑30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004. (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time) a wholly‑owned subsidiary of the entity that became the head company of the group (the head entity), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier‑1 company of the group at the formation time. Despite the amendment of section 719‑30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) Section 719‑160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719‑160(3) of the Income Tax Assessment Act 1997. (3) However, that effect of section 719‑160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division. (2) Paragraphs 701‑1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier‑1 company at the time the MEC group came into existence. (a) the entity and one or more other entities were members of a potential MEC group as eligible tier‑1 companies, throughout the period: (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier‑1 company, at the time the transitional group came into existence. To avoid doubt, sections 707‑325 and 707‑327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719‑305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707‑A of that Act. Subsection 719‑325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006. (1) A reference in an agreement to item 25 of the table in subsection 721‑10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: (1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: Division 725 applies to a scheme entered into on or after 1 July 2002. It also applies to a scheme entered into on or after 27 June 2002, but only if: ### Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (1) Division 727, as inserted by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 and amended by the New Business Tax System (Consolidation and Other Measures) Act 2003, applies to a scheme entered into on or after 1 July 2002. (b) a presumed indirect value shift that happens under the scheme and affects a realisation event that happens on or after 1 July 2002. (a) the economic benefits taken into account in determining that the scheme has resulted in that indirect value shift or presumed indirect value shift include economic benefits provided by: > Note: In that case, the consequences of the trigger event are worked out under Division 138 or 139 of the Income Tax Assessment Act 1997: see items 13 and 14 of Schedule 15 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002. (1) An indirect value shift does not have consequences under Division 727 of the Income Tax Assessment Act 1997 if, to the extent of at least 95% of their total market value, the greater benefits consist entirely of: (a) a right to have services that are covered by section 727‑240 of that Act provided directly by the losing entity to the gaining entity; or (d) if the losing entity’s 2002‑2003 income year ends before 30 June 2003—the start of the losing entity’s 2004‑2005 income year. (2) For the purposes of section 727‑850 (about a presumed indirect value shift affecting a realisation event) of the Income Tax Assessment Act 1997, subsection (1) of this section applies to the presumed indirect value shift: #### 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (2) Paragraph 727‑470(2)(a) of the Income Tax Assessment Act 1997 (as in force immediately before the commencement of this section) continues to have effect in relation to the indirect value shift as if the repeals and amendments made by Schedule 1, Parts 1 and 2 of Schedule 3 and Schedule 8 to the Tax Laws Amendment (Small Business) Act 2007 had not been made. ## Division 201 Object and application of Part 3‑6 ## 201‑1 Estimated debits 201‑1 Estimated debits Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002: (b) lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination; (c) a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination); (e) the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination); (f) the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination). ## Division 203 Benchmark rule ## 203‑1 Franking periods straddling 1 July 203‑1 Franking periods straddling 1 July 2002 Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period: ## Division 205 Franking accounts 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity ## 205‑1 Order of events provision 205‑1 Order of events provision If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows: (a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and (i) in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and (ii) in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis. ## 205‑5 Washing estimated debits out of th 205‑5 Washing estimated debits out of the franking account before conversion If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. > Note: A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002. ## 205‑10 Converting the franking account b 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 #### 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002: (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:23.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:87.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A franking surplus</span></p></td><td style="width:220.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.009.png" width="175" height="58" alt="Start formula Amount of the class A franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.010.png" width="190" height="56" alt="Start formula Amount of the class B franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.011.png" width="190" height="56" alt="Start formula Amount of the class C franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` ## 205‑15 Converting the franking account b 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 #### 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus): (a) a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Original surplus</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:85.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>class A</span></p></td><td style="width:220.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.012.png" width="169" height="38" alt="Start formula Amount of the original class A surplus times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.013.png" width="169" height="38" alt="Start formula Amount of the original class B surplus times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.014.png" width="169" height="38" alt="Start formula Amount of the original class C surplus times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (4) If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit): (a) a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company. (5) The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking deficit into 1997 Act franking debit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Original deficit</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking debit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(4)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:70.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A</span></p></td><td style="width:235.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.015.png" width="164" height="38" alt="Start formula Amount of the original class A deficit times start fraction 39 over 61 end fraction end formula "></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.016.png" width="164" height="38" alt="Start formula Amount of the original class B deficit times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.017.png" width="164" height="38" alt="Start formula Amount of the original class C deficit times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` ## 205‑20 A late balancing company may elec 205‑20 A late balancing company may elect to have its FDT liability determined on 30 June (2) A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if: (c) the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions. (3) The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if: (b) the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and ## 205‑25 Franking deficit tax 205‑25 Franking deficit tax (1) While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit. (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year. (3) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: > Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act. ## 205‑30 Deferring franking deficit 205‑30 Deferring franking deficit (1) The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account. (a) a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time; (3) If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if: (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity. ## 205‑35 No franking deficit tax if franki 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity #### 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If: the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time. ## 205‑70 Tax offset arising from franking 205‑70 Tax offset arising from franking deficit tax liabilities (1) Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections. (2) If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year. Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year. Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year. (5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in: that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement. (6) The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (7) The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. ## 205‑71 Modification of franking deficit 205‑71 Modification of franking deficit tax offset rules (2) The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (3) The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. ## 205‑75 Working out the tax offset for th 205‑75 Working out the tax offset for the first income year (i) are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and (a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and (b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section. (a) whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and ## 205‑80 Application of Subdivision C of D 205‑80 Application of Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 (1) This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002. (a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and (3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded. ## Division 208 Exempting entities and former exempting entities ## 208‑111 Converting former exempting comp 208‑111 Converting former exempting company’s exempting account balance on 30 June 2002 (1) This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002; (2) If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (3) If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (4) If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. (5) If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. ## Division 210 Venture capital franking 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 ## 210‑1 Order of events provision 210‑1 Order of events provision The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows: (a) any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and (i) in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and (ii) in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis. ## 210‑5 Washing estimated venture capital 210‑5 Washing estimated venture capital debits out of the old sub‑account before conversion If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. ## 210‑10 Converting the venture capital su 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 #### 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF.  ## 210‑15 Converting the venture capital su 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 #### 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act). (2) If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus): (a) a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF. (4) If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit): (a) a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF. ## Division 214 Administering the imputation system ## 214‑1 Application 214‑1 Application This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period). ## 214‑5 Entity must give a franking return 214‑5 Entity must give a franking return (1) The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period: (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. ## 214‑10 Notice to a specific corporate ta 214‑10 Notice to a specific corporate tax entity (1) The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period. (2) The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner. (3) The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5. ## 214‑15 Effect of a refund on franking re 214‑15 Effect of a refund on franking returns (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and (d) the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner; the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received. (3) A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time: ## 214‑20 Franking returns for the income y 214‑20 Franking returns for the income year (1) A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends. (2) However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period. ## 214‑25 Commissioner may make a franking 214‑25 Commissioner may make a franking assessment (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. ## 214‑30 Commissioner taken to have made a 214‑30 Commissioner taken to have made a franking assessment on first return (a) the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed: (d) the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and (e) the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return. (2) The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day. ## 214‑35 Amendments within 3 years of the 214‑35 Amendments within 3 years of the original assessment (1) The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period. (2) The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made. ## 214‑40 Amended assessments are treated a 214‑40 Amended assessments are treated as franking assessments Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period. ## 214‑45 Further return as a result of a r 214‑45 Further return as a result of a refund affecting a franking deficit tax liability (b) on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax); the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed: (c) the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and (d) the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return. (2) The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day. ## 214‑50 Later amendments—on request 214‑50 Later amendments—on request The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period: ## 214‑55 Later amendments—failure to make 214‑55 Later amendments—failure to make proper disclosure If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day. ## 214‑60 Later amendments—fraud or evasion 214‑60 Later amendments—fraud or evasion If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and ## 214‑65 Further amendment of an amended p 214‑65 Further amendment of an amended particular If: (a) a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and (b) the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment; ## 214‑70 Other later amendments 214‑70 Other later amendments In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment. ## 214‑75 Amendment on review etc. 214‑75 Amendment on review etc. ## 214‑80 Notice of amendments 214‑80 Notice of amendments If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment. ## 214‑85 Validity of assessment 214‑85 Validity of assessment The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with. ## 214‑90 Objections 214‑90 Objections If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953. ## 214‑100 Due date for payment of franking 214‑100 Due date for payment of franking tax (1) Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period. (a) the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and (b) the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3); the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on: (c) if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or ## 214‑105 General interest charge 214‑105 General interest charge If: ## 214‑110 Refunds of amounts overpaid 214‑110 Refunds of amounts overpaid Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax. ## 214‑120 Record keeping 214‑120 Record keeping ## 214‑125 Power of Commissioner to obtain 214‑125 Power of Commissioner to obtain information Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division. ## 214‑135 Interpretation 214‑135 Interpretation If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997. ## Division 219 Imputation for life insurance companies ## 219‑40 Reversing and replacing (on tax p 219‑40 Reversing and replacing (on tax paid basis) certain franking credits that arose before 1 July 2002 (a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day: (3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002. ## 219‑45 Reversing (on tax paid basis) cer 219‑45 Reversing (on tax paid basis) certain franking debits that arose before 1 July 2002 (a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002: > Note: As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date. ## Division 220 Imputation for NZ resident companies and related companies ## 220‑1 Application to things happening on 220‑1 Application to things happening on or after 1 April 2003 (b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997. ## 220‑5 Residency requirement for income y 220‑5 Residency requirement for income year including 1 April 2003 In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003. ## 220‑10 NZ franking company cannot frank 220‑10 NZ franking company cannot frank before 1 October 2003 ## 220‑35 Extended time to make NZ franking 220‑35 Extended time to make NZ franking choice (1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year. ## 220‑501 Franking and exempting accounts 220‑501 Franking and exempting accounts of new former exempting entities (a) a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of: (i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time; (iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period; (2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if: (b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time: (ii) the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. > Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. > Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. (7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table: <table cellspacing="0" cellpadding="0" style="width:365.35pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount of the franking credit and the exempting debit</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">If:</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the credit and debit is:</span></p></td></tr></thead><tbody><tr><td style="width:22.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The period starts immediately after 7.30</span><span> </span><span>pm by legal time in the Australian Capital Territory on 13</span><span> </span><span>May 1997</span></p></td><td style="width:141.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Both these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was not in surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>All these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was in surplus at the start of the period;</span></p><p class="Tablea"><span>(c) the surplus in the account at the switch time is greater than the surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the franking surplus in the Australian company’s franking account at the switch time; and</span></p><p class="Tablea"><span>(b) the franking surplus in the Australian company’s franking account at the start of the period</span></p></td></tr></tbody></table> ``` (a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and (b) the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period. ## Part 3 ‑10—Financial transactions (a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and (2) Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001 (the new Act) applies to the plant on this basis: (a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant’s opening adjustable value; and (b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and (c) if you excluded an amount from your assessable income under section 42‑290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999—the cost of the plant, and its opening adjustable value, are reduced by that amount; and (d) if subparagraph (1)(b)(ii) applies to you—you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi‑owner of the plant under the former Act continue. (3) If you were using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis: (a) for the diminishing value method—replace the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate you were using; and (i) replace the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate you were using; and (ii) increase the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note 1: Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced. > Note 2: Small business entities can choose to work out the decline in value of their depreciating assets under Division 328. (a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or (3) If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40‑70(1) or 40‑75(1) of the new Act that includes the plant’s effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and (2) For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets. (3) For a case where the plant is merged into another depreciating asset, section 40‑125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it. (b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and (a) you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and (b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU’s opening adjustable value. (1) Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001. (2) For a unit of software for which you were deducting amounts under Subdivision 46‑B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis: (d) you must use the same effective life you were using under Subdivision 46‑B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001. (1) This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day. (b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and (c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and (1) This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001. > Note: Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8). (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330‑80 of the former Act for your income year ending on 30 June 2001; and (c) in applying the formula in section 40‑75 of the new Act for the income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The remaining effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these: (i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and (ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (7) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and (b) the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of expenditure incurred in carrying on eligible quarrying operations—the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (i) you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day) after 30 June 2001; or (ii) the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day) after 30 June 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which the start day occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year. there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (1) This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330‑H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and (c) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (i) any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset); (i) any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (4) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (4) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (b) the expenditure would have been transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330‑H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for your income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (1) Despite subsections 40‑35(5), 40‑38(5) and 40‑40(4), there is no additional decline in the value of the notional asset referred to in those subsections if: (a) apart from this section, subsection 40‑35(5), 40‑38(5) or 40‑40(4) would apply because the real asset referred to in that subsection is disposed of; and (a) at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373‑35 of the former Act; and (b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day. (a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and (1) Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time). (2) Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time. (a) you have deducted or can deduct an amount under Subdivision 387‑G of the former Act for an amount (the qualifying amount) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and (b) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and (1) This section applies to you if you have deducted or can deduct an amount under Subdivision 400‑A of the former Act for an amount (the qualifying amount) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400‑A of the former Act. (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and (c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400‑15(3) of the former Act; and (1) Units of plant that you had allocated to a pool under Subdivision 42‑L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act. (a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and (c) in applying the formula in section 40‑70 of the new Act for your income year in which 1 July 2001 occurs—it has a base value equal to that opening adjustable value; and (d) you replace the component in the formula in subsection 40‑70(1) of the new Act that includes an asset’s effective life with the pool percentage you were using for the pool; and (e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40‑115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and (f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset. (3) An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item). > Note 1: You work out the decline in value of an item removed under this subsection under Subdivision 40‑B of the new Act, using the cost for it worked out under section 40‑205 of the new Act. (b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset. (2) The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year) in this way: (a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and (b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section. (a) for a unit of plant (including IRUs and expenditure on software that is not pooled)—its undeducted cost at the end of 30 June 2001; or (b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence—the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or (c) for transport capital expenditure—the entity’s amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or (d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (e) for expenditure on evaluating the impact on the environment of a project—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (f) for assets that were pooled under Subdivision 42‑M or 42‑L of the former Act—the closing balance of the pool at the end of 30 June 2001. (4) The asset’s base value for applying the formula in section 40‑70 of the new Act for the diminishing value method is that opening adjustable value. (5) The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an item of plant for which you were using the prime cost method—using the rules in section 40‑10 of this Act; and (c) for a unit of software for which the entity was deducting amounts under Subdivision 46‑B of the former Act—using the rules in subsection 40‑25(2) of this Act; and (f) for an amount of expenditure on evaluating the impact on the environment of a project—using the rules in section 40‑55 of this Act. (6) The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an amount of unrecouped expenditure under Division 330 of the former Act—using the rules in section 40‑35 of this Act; and (b) for an amount of transport capital expenditure under Division 330 of the former Act—using the rules in section 40‑40 of this Act; and (7) The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act. (a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑C of the former Act; or (b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑H of the former Act; or (c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387‑B of the former Act; or (d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; or (e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365. (9) The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001. (10) You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount). (11) You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount. (1) Subsections 40‑65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened: (b) you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act. (a) paragraph 40‑65(6)(a) of the Income Tax Assessment Act 1997 included both events set out in subsection (1) of this section; and (b) subsections 40‑65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events. (1) A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936. (2) An amount you have deducted or can deduct for a water facility under Subdivision 387‑B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40‑F of the new Act. (3) A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936. (a) you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40‑115 (about splitting a depreciating asset) or 40‑125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and (b) it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40‑72 of that Act; (2) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if: (c) it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40‑72 of that Act. (3) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset) before 10 May 2006 if: (b) the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and (d) it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40‑72 of that Act. (a) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you: (b) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001. (2) If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act. (3) Otherwise, Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section. (a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or (b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or (ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life. (1) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001. > Note: If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40\. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997. (1A) Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001. (1B) Subsection (1) applies to a mining, quarrying or prospecting right (the new right) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if: (i) the other company is a member of the same wholly‑owned group as the original holder and was a member of that group just before that day; and (ii) the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer. (1D) Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if: (b) the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001. (a) you acquired, under an interest realignment arrangement, an interest (a new interest) in a mining, quarrying or prospecting right; and (b) the interest was acquired in exchange for one or more other interests (old interests) in other mining, quarrying or prospecting rights; and Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001. (a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or (b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership; the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act. (3) An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that: (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act. (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act. (6) Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243. (7) An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if: (a) you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and (8) The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section. (c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act. (2) Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001. A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act. if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011. (2) The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011. (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset for an income year is the amount worked out under section 40‑130 if: (a) the income year is the year in which you start to use the asset, or have it installed ready for use, for a taxable purpose; and (b) subsection (2) (about businesses with turnover less than $500 million) applies to you for the year and for the income year in which you started to hold the asset (if that was an earlier year); and > Note 1: An effect of paragraph (1)(a) is that this Subdivision only applies to one income year per asset. See also subsection 40‑135(1). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $500 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. Exception—assets for which the decline in value is worked out under section 40‑82 or Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (3) However, this section does not apply to a depreciating asset for an income year if you work out the decline in value of the asset for the income year under any of the following: (1) For the purposes of paragraph 40‑120(1)(c) and section 328‑182, you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you: > Note: Section 328‑182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997. (i) entering into a contract under which you hold the post‑12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑12 March 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post‑12 March 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (8) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (9) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (10) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (1) For the purposes of section 40‑120, the decline in value for the income year in which paragraph 40‑120(1)(a) is satisfied (the current year) is: > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 12 March 2020 to 30 June 2020 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2020 to 30 June 2021. (a) 50% of the asset’s cost as at the end of the current year, disregarding any amount included in the second element of the asset’s cost after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997, assuming its cost were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (3) However, the amount worked out under subsection (2) for an income year cannot be more than the amount that is the asset’s cost for the year. (a) 50% of the sum of the asset’s opening adjustable value for the current year and any amount included in the second element of its cost for that year, disregarding any amount included in that second element after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997 assuming: (ii) for the prime cost method—the component “Asset’s \*cost” in the formula in subsection 40‑75(1) of that Act (as adjusted under that section) were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (b) for the prime cost method—the sum of its opening adjustable value for the income year and any amount included in the second element of its cost for that year. (1) The decline in value of a depreciating asset is not worked out under this Subdivision for an income year if this Subdivision already applied in working out the decline in value of the asset for an income year. (2) For an income year later than the year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (3) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (4) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) You may choose that the decline in value of a particular depreciating asset for an income year, and subsequent income years, is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the first income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. If this Subdivision applies to work out the decline in value of a depreciating asset you hold for an income year, no other provision of this Act or the Income Tax Assessment Act 1997 applies to work out that decline in value. (1) For the purposes of this Subdivision, you are covered by this section for a depreciating asset if, on or before 30 June 2023: (2) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (3) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or Exception—assets for which the decline in value is worked out under Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (a) the asset is allocated to a low‑value pool, or expenditure on the asset is allocated to a software development pool (see Subdivision 40‑E of the Income Tax Assessment Act 1997); or (b) you or another taxpayer has deducted or can deduct amounts for the asset under Subdivision 40‑F of the Income Tax Assessment Act 1997 (about primary production depreciating assets). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $5 billion; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this section. (ii) if the 2019‑20 income year ends on or before 6 October 2020—the sum of your ordinary income (if any) and statutory income (if any) for the 2019‑20 income year; and (c) the sum of the amounts worked out under subsection (3) for the 2016‑17, 2017‑18 and 2018‑19 income years exceeds $100 million. (b) next, work out the cost of each of those assets (including any amounts included in the second element of the asset’s cost at a time that is in the income year); (4) For the purposes of subsection (3), disregard an asset if, at the time you first used the asset, or had it installed ready for use, for a taxable purpose: (a) it was not reasonable to conclude that you would use the asset principally in Australia for the principal purpose of carrying on a business; or (5) For the purposes of paragraph (3)(b), to work out the cost of a depreciating asset that is capital works (see section 43‑20 of the Income Tax Assessment Act 1997): (a) disregard section 40‑45 of that Act and work out the cost of the capital works using Subdivision 40‑C of that Act; and (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under subsection (3) if: (a) where section 40‑155 covers you for the current year (regardless whether section 40‑157 also covers you for the current year)—an exclusion applies to you and the asset for the current year under section 40‑165 (about exclusions for businesses with turnover of $50 million or more); or (ii) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s start time occurs in the current year—the asset’s cost as at the end of the current year, disregarding any amount included in the asset’s cost after 30 June 2023; or (b) if the asset’s start time occurred in an earlier year—the sum of its opening adjustable value for the current year and any amount included in the second element of its cost for the current year, disregarding any amount included in the asset’s cost after 30 June 2023. > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 6 October 2020 to 30 June 2021 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2021 to 30 June 2022. (a) where paragraph 40‑160(2)(a) applies—section 40‑155 would not cover you for the income year if the reference in that section to $5 billion were instead a reference to $50 million; and (i) entering into a contract under which you hold the post‑6 October 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑6 October 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of satisfying paragraph 40‑160(1)(a) for the post‑6 October 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you already satisfied paragraph 40‑160(1)(a) of this Act for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (9) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (1) For the purposes of subsections 40‑160(2) and 40‑170(1A), an exclusion applies to you and an asset for an income year if any of the exclusions in this section applies in relation to the asset. (4) This exclusion applies in relation to the asset if the asset is available for use, at any time in the income year, by any of the following: (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under this section if: (ii) you started to use the asset, or have it installed ready for use, for a taxable purpose in an earlier income year; and (b) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under section 40‑82 of the Income Tax Assessment Act 1997—the amount worked out under subsection (3); or (b) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under Subdivision 40‑BA of this Act—the amount worked out under subsection (4); or Assets affected by section 40‑82 of the Income Tax Assessment Act 1997 (about assets costing less than $150,000, medium sized businesses) (a) the amount that would be the asset’s decline in value for the year under section 40‑82 of the Income Tax Assessment Act 1997, assuming the reference in subparagraph 40‑82(3A)(b)(ii) of that Act to 31 December 2020 were instead a reference to the 2020 budget time; and (a) the amount that would be worked out under paragraph 40‑130(2)(a) or (4)(a) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(a) and (4)(a) to 30 June 2021 were instead references to the 2020 budget time; and (c) the amount that would be worked out under paragraph 40‑130(2)(b) or (4)(b) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(b) and (4)(b) to “the amount worked out under paragraph (a)” were instead references to “the amounts worked out under paragraphs 40‑170(4)(a) and (b)”. (a) the amount that would be the asset’s decline in value for the year under Division 40 of the Income Tax Assessment Act 1997, disregarding any amounts included in the eligible second element worked out under section 40‑175 of this Act for the asset for the year; and The amount worked out under this section (the eligible second element) for a depreciating asset for an income year is the sum of any amounts included in the second element of the asset’s cost at a time that is in both of the following periods: (1) For an income year later than a year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (2) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (3) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) This section applies if the decline in value for a depreciating asset for an income year is worked out under this Subdivision, and at a time (the balancing adjustment time) in a later income year: (i) it becomes not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (b) none of the requirements in paragraphs 40‑295(1)(a), (b) or (c) of the Income Tax Assessment Act 1997 are satisfied in relation to the asset. (2) For the purposes of Subdivision 40‑D of the Income Tax Assessment Act 1997 assume that, at the balancing adjustment time, you stop using the asset, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again. (3) For the purposes of section 40‑180 of the Income Tax Assessment Act 1997 assume that the reference in item 3 of the table in subsection 40‑180(2) of that Act to “because you stop using it for any purpose expecting never to use it again” were instead a reference to “because of section 40‑185 of the Income Tax (Transitional Provisions) Act 1997”. (4) If a balancing adjustment event happens to a depreciating asset you hold because of this section, this Subdivision cannot apply to work out the decline in value of the asset for a later income year. (1) You may choose that the decline in value of a particular depreciating asset for an income year is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year. (1) Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40. (a) you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset: (ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and (4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day. (5) The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if: (i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or (ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and  > sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose. (7) Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens: (a) if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b). (i) an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and (ii) the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and (3) The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount. (a) on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and (c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and (ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal; (2) There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal. (3) Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount. If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997. (a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and (b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and: (i) the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, the R&D entity is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—a clawback amount under section 355‑447 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑466 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. (b) section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions. > Note 2: The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and: (i) the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset; (ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, an R&D entity (the partner) that is a partner in the R&D partnership and is entitled to one or more new law deductions for one or more income years for the asset, is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—a clawback amount under section 355‑449 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑468 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s new law deductions mentioned in paragraph (2)(b) of this section. (4) Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event. > Note: Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions. (1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant. (b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and (3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it. (a) there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and (b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act. (2) The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor. (3) The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and <table cellspacing="0" cellpadding="0" style="width:364.2pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:353.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading" style="page-break-inside:avoid"><span>Conditions for small business taxpayers retaining accelerated rates</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Condition</span></p></td></tr></thead><tbody><tr><td style="width:21.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:321.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>The transferee must have been a small business taxpayer for the income year (the </span><span style="font-weight:bold; font-style:italic">start year</span><span>) that includes the time when the entity first used the plant, or first had it installed ready for use.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>2</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>At that time, neither of these applies:</span></p><p class="Tablea"><span>(a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;</span></p><p class="Tablea"><span>(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection</span><span> </span><span>(5).</span></p></td></tr></tbody></table> ``` (4) For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership. (5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement. (a) for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or (i) replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and (ii) increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).  (b) if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11). (c) that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and (d) that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and (e) that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity. (a) for taxable supplies (if any) the entity makes during the year in the course of carrying on a business—the value (as defined by section 9‑75 of the GST Act) of the supplies; and (b) for other supplies the entity makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies. (1) The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for: (a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (c) for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or (d) for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant. (3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115. (4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain. (5) Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee. (i) the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or (a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and (1) A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act. (2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year. For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if: Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act. (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset): and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply. (i) for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or (ii) for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and (c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act. (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and (2) Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act. The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under: (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on: (2) You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act. (3) A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under: (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and (2) Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act. A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act. The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001. If: (d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act; (a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and (a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and (b) the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and (c) paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997. Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years. (1) For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section. (b) the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (b) that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (1) There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea" style="page-break-after:avoid"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a); and</span></p><p class="Tablea" style="page-break-after:avoid"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (b) disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (f) an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division. (4) If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45‑5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest. (5) If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45‑10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest. Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Disregard the use of the following amounts in determining (for the purposes of Subdivision 50‑A of the Income Tax Assessment Act 1997 whether a fund established before 1 July 1997 operates and pursues its purposes in Australia: Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years. (2) However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date. Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if: (b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time. Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years. 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years (1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act. <table cellspacing="0" cellpadding="0" style="margin-left:56.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:258.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Application provisions for specific sections</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-size:9pt; font-weight:bold">Item</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">This section of the </span><span style="font-size:9pt; font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-size:9pt; font-weight:bold"> ...</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">Applies as described in this provision of this Act ...</span></p></td></tr></thead><tbody><tr><td style="width:24.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55(1)</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>95</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>8</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td></tr></tbody></table> ``` (a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and (b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997. > Note: Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year. (b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997; sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997). > Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock. (3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997. (a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and (b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936; > Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal. #### 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997. (1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year. (2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936. (3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year: (a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners; (b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed. > Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year. > Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year. (b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year; the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year. (2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. (3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2). #### 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997. #### 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business (1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. (2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity. > Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997. (1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. (2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value. > Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997. #### 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year. (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. > Note: Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. > Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given). (5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act). (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment. > Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%. (5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%. (6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.  > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section. (b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4). Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age. Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later. Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies. Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3. (4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997. (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%. > Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986. (5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D. > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. (a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and (b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year). (3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and (2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual: (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income. > Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F. > Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997. > Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997. #### 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 (1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012. (2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies. (3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act. (b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009. (2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if: (i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest; (iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or (i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest; (iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009. (2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time. (4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2): (a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and (b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being: (ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and (c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and (d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if: (i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or (ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and (e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and (i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and (ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and (g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest. (a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced: (i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or (ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and (b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5. (2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right. (3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right. (2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. (3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section. Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years. (1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision. > Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision). > Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936). > Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997. (a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936. (1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936. (2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997. > Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997. (3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and (d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; (f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time. > Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and (d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015. (a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or (4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if: (b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset. The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year. (a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and (1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied: (b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and (d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works). (3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936. Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936. (b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006. (2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement. > Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement. Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual: (b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her. 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act (1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee). (2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year: (3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection. #### 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997. Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936). (2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if: (a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; (a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011); (b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986. > Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section. If: (a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and (b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936; Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995. (1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997. (2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997. (3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997. (4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997. > Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one. Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year: (a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and (b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year; the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation. Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset. (b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section); > Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply. (1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if: (a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and (2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value. (4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value. (a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997. (2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less. (1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936: (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. (1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if: (2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by: (a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or (a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or (2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period. Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year: If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997. (1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002. (2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset. (3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required. (i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and (ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and (c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and (f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997). (a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or (1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:  > total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part. (a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or (2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section. (3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1). (1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences. > Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997. (c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets). (4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act. (5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act. Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement. (a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and (2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time. (a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and (ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs. (2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer. (a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and (b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest; (2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event. (3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly. (4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly. <table cellspacing="0" cellpadding="0" style="width:362.55pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:351.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Creating a CGT asset</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">CGT event number</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Applicable amount</span></p></td></tr></thead><tbody><tr><td style="width:50.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D1</span></p></td><td style="width:290.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the incidental costs the originating company incurred that relate to the CGT event</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D2</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the option</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D3</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the right</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>F1</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred on the grant, renewal or extension of the lease</span></p></td></tr></tbody></table> ``` (5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day. A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision. (a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996. (b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. (b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend. (3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities. (1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company. (2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred. (3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company. (1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of: (2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of: (3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note. (1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised. (b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and (ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act. You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and (b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996. (c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and (c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over. (3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. (a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and (c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and (d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act. (3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division. Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years. A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: (1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day. (2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice. (a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and (b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and (a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and (b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and (c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group. (5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004. (6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection. (1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss): (b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions); and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time: (i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or (e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and (f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and (ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred; (2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if: (a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these: (i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset; (ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and (3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act. (a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and (b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section. (5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of: (a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and (b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset. Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. (ii) that could have been deducted, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the deduction had not been limited by the company’s income for that income year; and (ii) that could have been applied, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the application of the loss had not been limited by the company’s capital gains for that income year. 170‑C Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred #### 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years. #### 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). #### Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997. Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997. If: (a) all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (d) that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and (e) the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place. Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years. > introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament. Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day. #### Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting #### 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B. (1) The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day. (2) No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted. #### 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting (1) Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if: (a) the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and (b) none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount. (2) No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount. (1) This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account. (2) For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. > Note 2: If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60. (3) For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)). (4) For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. (5) The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if: (a) during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and (b) the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section. (a) the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and (b) during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components. (7) For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. (8) Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it: (b) the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component. (9) Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component. (10) For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002: (b) lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination; (c) a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination); (e) the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination); (f) the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination). Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period: 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows: (a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and (i) in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and (ii) in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. > Note: A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002. #### 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002: (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:23.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:87.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A franking surplus</span></p></td><td style="width:220.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.009.png" width="175" height="58" alt="Start formula Amount of the class A franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.010.png" width="190" height="56" alt="Start formula Amount of the class B franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.011.png" width="190" height="56" alt="Start formula Amount of the class C franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` #### 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus): (a) a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Original surplus</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:85.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>class A</span></p></td><td style="width:220.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.012.png" width="169" height="38" alt="Start formula Amount of the original class A surplus times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.013.png" width="169" height="38" alt="Start formula Amount of the original class B surplus times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.014.png" width="169" height="38" alt="Start formula Amount of the original class C surplus times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (4) If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit): (a) a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company. (5) The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking deficit into 1997 Act franking debit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Original deficit</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking debit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(4)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:70.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A</span></p></td><td style="width:235.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.015.png" width="164" height="38" alt="Start formula Amount of the original class A deficit times start fraction 39 over 61 end fraction end formula "></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.016.png" width="164" height="38" alt="Start formula Amount of the original class B deficit times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.017.png" width="164" height="38" alt="Start formula Amount of the original class C deficit times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (2) A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if: (c) the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions. (3) The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if: (b) the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and (1) While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit. (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year. (3) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: > Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act. (1) The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account. (a) a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time; (3) If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if: (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity. #### 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If: the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time. (1) Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections. (2) If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year. Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year. Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year. (5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in: that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement. (6) The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (7) The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (2) The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (3) The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (i) are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and (a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and (b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section. (a) whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and (1) This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002. (a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and (3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded. (1) This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002; (2) If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (3) If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (4) If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. (5) If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows: (a) any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and (i) in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and (ii) in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. #### 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF.  #### 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act). (2) If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus): (a) a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF. (4) If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit): (a) a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF. This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period). (1) The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period: (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (1) The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period. (2) The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner. (3) The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5. (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and (d) the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner; the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received. (3) A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time: (1) A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends. (2) However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period. (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (a) the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed: (d) the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and (e) the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return. (2) The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day. (1) The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period. (2) The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made. Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period. (b) on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax); the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed: (c) the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and (d) the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return. (2) The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day. The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period: If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day. If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and If: (a) a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and (b) the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment; In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment. If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment. The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with. If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953. (1) Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period. (a) the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and (b) the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3); the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on: (c) if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or If: Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax. Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division. If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997. (a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day: (3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002. (a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002: > Note: As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date. (b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997. In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003. (1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year. (a) a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of: (i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time; (iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period; (2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if: (b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time: (ii) the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. > Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. > Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. (7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table: <table cellspacing="0" cellpadding="0" style="width:365.35pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount of the franking credit and the exempting debit</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">If:</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the credit and debit is:</span></p></td></tr></thead><tbody><tr><td style="width:22.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The period starts immediately after 7.30</span><span> </span><span>pm by legal time in the Australian Capital Territory on 13</span><span> </span><span>May 1997</span></p></td><td style="width:141.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Both these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was not in surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>All these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was in surplus at the start of the period;</span></p><p class="Tablea"><span>(c) the surplus in the account at the switch time is greater than the surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the franking surplus in the Australian company’s franking account at the switch time; and</span></p><p class="Tablea"><span>(b) the franking surplus in the Australian company’s franking account at the start of the period</span></p></td></tr></tbody></table> ``` (a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and (b) the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period. Subdivision 235‑I of the Income Tax Assessment Act 1997 applies to assets acquired by the trustee of an instalment trust in: (1) Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years. (2) However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time). (3) The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997. Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997. (2) Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in: (1) Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that: (b) is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose. (a) if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007. > Note: To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997. (b) contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option; the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option. (3) For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5). (4) If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is: (a) the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less (b) the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest. (5) If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is: (6) If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil. (1) If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one. (2) If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year. (3) If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year. (a) for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and (b) for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year: Step 1. Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. Step 2. Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3). Step 3. If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year. > Note: Example: Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75): (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred: (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times: (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate. Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008. (a) the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and (b) the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities: (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (i) the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or (ii) the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and (f) none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made: (i) Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event; (ii) a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year. (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (b) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (c) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year #### 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year (a) the requirements set out in paragraphs 275‑610(1)(a), (b) and (c) of the Income Tax Assessment Act 1997 are satisfied in respect of an amount of non‑arm’s length income of a managed investment trust in relation to an income year; and (b) the managed investment trust became a party to the scheme mentioned in paragraph 275‑610(1)(a) of that Act before the day on which the Bill that became the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 was introduced into the House of Representatives; and Division 276 of the Income Tax Assessment Act 1997 as inserted in that Act by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (the amending Act) applies as set out in subitem 1(1) of Schedule 8 to the amending Act. (b) if the trustee of the trust has made a choice for the purposes of paragraph 1(1)(b) of Schedule 8 to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016—the first income year starting on or after 1 July 2015; or (c) if the trustee of the trust has made a choice for the purposes of subparagraph 276‑10(1)(e)(i) of the Income Tax Assessment Act 1997 in respect of the 2016‑17 income year—that income year. (c) the trust is an AMIT for an income year (the discovery year) that is the starting income year or a later income year. (1) This section applies if the trust has an under or over of a character in the discovery year relating to the base year. (b) if, at a time, the trust sent its members distribution statements for an income year that is prior to the starting income year—assume that the trust sent those members AMMA statements for that income year at that time. (3) For the purposes of Division 276 of the Income Tax Assessment Act 1997, treat the under or over mentioned in subsection (1) as an under or over of the AMIT, in the discovery year relating to the base year, of the character mentioned in that subsection. (a) had the under or over mentioned in subsection (1) been discovered before the starting income year, this Act would have operated to produce a particular effect (the pre‑AMIT scheme effect) for the base year in relation to the amount or amounts reflected in the under or over; and 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT #### 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT (b) working out the amount (if any) of the entity’s capital gain under subsection 104‑70(4) of the Income Tax Assessment Act 1997. (3) For the purpose of working out the amount of the non‑assessable part mentioned in paragraph 104‑70(1)(b), treat the following provisions as being in operation at the time the payment was made: (b) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in paragraph (a). (4) Subsection (3) does not apply to the extent (if any) that the entity, in the income tax return that it lodged for the income year in which the payment was made, included the amount of the payment in its assessable income for that income year. (5) For the purposes of section 118‑20 of the Income Tax Assessment Act 1997, treat this section as being in Part 3‑1 of that Act. (2) The Commissioner cannot amend the entity’s assessment for the income year in which the payment was made in a particular way if: (b) the Commissioner could not amend the assessment in that way if the following provisions were in operation at the time the payment was made: (ii) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in subparagraph (i); and Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82‑10F). (2) The object of this section is to apply (with modifications) provisions limiting deductibility in respect of certain contributions made during the period that: (a) Subdivisions AA and AB of Division 3 of Part III of the Income Tax Assessment Act 1936, as in force just before they were repealed by the Superannuation Legislation Amendment (Simplification) Act 2007; (b) any other provision of the Income Tax Assessment Act 1936, or of any instrument made under that Act, to the extent that it relates to the operation of those Subdivisions; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of those Subdivisions. (b) the deduction limit mentioned in section 82AAC for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (c) the deduction limit mentioned in section 82AAT for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (d) Division 290 of the Income Tax Assessment Act 1997 did not apply to contributions made during the income year mentioned in paragraph (a). (2) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of a defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection and subsection (4), the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 5 September 2006; (b) the defined benefit interest mentioned in paragraph (2)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 5 September 2006, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (2)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (4) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of the defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection, the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 12 May 2009; (b) the defined benefit interest mentioned in paragraph (4)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 12 May 2009, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (4)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (1) The object of this section is to apply (with modifications) provisions relating to excess non‑concessional contributions tax in respect of certain contributions made during the period that: (b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision. (ea) in a case where paragraph 292‑95(1)(b) of that Act would have allowed the contribution mentioned in that paragraph to be made at a time within that period—that paragraph allowed the contribution to be made on or before 30 June 2007; and (f) paragraph 292‑95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and (fa) in a case where subsection 292‑100(2), (4), (7) or (8) of that Act would have allowed the contribution mentioned in that subsection to be made at a time within that period—that subsection allowed the contribution to be made on or before 30 June 2007; and (g) paragraph 292‑100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and (h) contributions made during that period that are covered under section 292‑100 of that Act reduce the person’s CGT cap amount for the 2007‑2008 financial year in accordance with subsection 292‑105(2) of that Act (and despite subsection (1) of that section); and (i) if the conditions in subsection (4) are satisfied—the person’s excess non‑concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and (b) the Commissioner gives the person a transitional release authority under subsection 292‑80A(2) in response to the application; and (c) the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292‑80B within 21 days after the date of the release authority; and (d) the superannuation provider pays the person the amount required under section 292‑80C in relation to the transitional release authority. (b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act). (6) The amount to be included in the first person’s amount of non‑concessional contributions under subparagraph (3)(b)(ii) is the sum of: (a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and (b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made. (c) under Division 295 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)), the contribution is included in the assessable income of the superannuation provider in relation to the superannuation plan to which the contribution is made; and (8) For the purposes of paragraph (7)(b), treat the person as an employee of the other entity if the person would be treated as an employee of the other entity under Division 290 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)). (1) A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007. (2) The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292‑80(3)(b)(i), the person would have excess non‑concessional contributions for the financial year mentioned in paragraph 292‑80(3)(a). (4) For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out: The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 21 days after the date of the release authority. (1) A superannuation provider that has been given a transitional release authority in accordance with section 292‑80B must pay to the person within 30 days after receiving the release authority the least of the following amounts: (a) if the person requests the provider in writing to pay a specified amount in relation to the release authority—that amount; (c) the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person in complying superannuation plans. > Note 1: Section 288‑95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection. > Note 2: Section 288‑100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority. > Note 3: For reporting obligations on the superannuation provider in these circumstances, see section 390‑65 in Schedule 1 to the Taxation Administration Act 1953. (2) The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person in complying superannuation plans. (3) Section 307‑125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section. (a) your non‑concessional contributions cap for the 2015‑2016 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsection 292‑85(7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 applies after the commencement of this section as if: (d) subsection 292‑85(6) of that Act as so amended had been applied (taking into account paragraph (c) of this subsection) for the purposes of working out your non‑concessional contributions cap for the 2016‑2017 financial year. (2) For the purposes of working out your non‑concessional contributions caps for the 2017‑2018 financial year and the 2018‑2019 financial year, if: (a) your non‑concessional contributions cap for the 2016‑2017 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsections 292‑85(6) and (7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 apply after the commencement of this section as if the amount worked out under subsection 292‑85(5) of that Act as so amended were $380,000. (3) To avoid doubt, this section does not affect your non‑concessional contributions cap for any financial year that ended before 1 July 2017. The tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your non‑concessional contributions (see section 292‑90 of the Income Tax Assessment Act 1997) for the financial year. (2) Subject to section 294‑55, the amendments of Division 294 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Treasury Laws Amendment (2017 Measures No. 2) Act 2017 apply on and after 1 July 2017. Despite sections 294‑30 and 294‑140 of the Income Tax Assessment Act 1997 (which are about when you have excess transfer balance), you do not have excess transfer balance in your transfer balance account on any day in the period of 6 months beginning on 1 July 2017 if: (a) the only transfer balance credits in the account in that period arose under item 1 of the table in subsection 294‑25(1) of that Act (which is about superannuation income streams you have just before 1 July 2017); and (b) the sum of those transfer balance credits exceeds your transfer balance cap, but is less than or equal to $1,700,000; and (c) at the end of the period, the sum of all the transfer balance debits arising in your transfer balance account equals or exceeds the amount of the excess from paragraph (b). (1) Despite subsection 294‑10(2), a transfer balance credit arises under item 4 of the table in subsection 294‑25(1) of the Income Tax Assessment Act 1997 only in relation to a borrowing that arises under a contract entered into on or after 1 July 2017. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2017 is treated as if it arose under a contract entered into before 1 July 2017 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) on 1 July 2017, a transfer balance debit arose in your transfer balance account under item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997; and (b) the sum of all the transfer balance credits that arise in your transfer balance account under item 1 of the table in subsection 294‑25(1) of that Act exceeds the amount that would, apart from this section, be the amount of that debit. (2) Despite column 2 of item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997, the amount of the transfer balance debit is instead equal to the sum worked out under paragraph (1)(b) of this section. 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain > The object of this Subdivision is to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the following legislative changes: (a) the introduction of a transfer balance cap (as a result of Schedule 1 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016); (b) the exclusion of transition to retirement income streams (and similar income streams) from being superannuation income streams in the retirement phase (as a result of Schedule 8 to that Act). (a) starting on the start of the day on which the Bill that became the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 was introduced into the House of Representatives; and (a) at the start of the pre‑commencement period, a CGT asset of a fund is a segregated current pension asset of the fund; and (i) at a time (the cessation time) in the pre‑commencement period, the asset ceases to be a segregated current pension asset of the fund; or (ii) at the start of 1 July 2017 (also the cessation time), the asset ceases to be a segregated current pension asset of the fund because it supports a superannuation income stream covered by subsection 307‑80(3) of the Income Tax Assessment Act 1997; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (b) the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year is greater than nil; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and #### 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑115(3)(a), the fund makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the fund’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Subsection 295‑390(1) of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). > 2016‑17 non‑exempt proportion means 1 minus the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year. #### 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset (i) the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997 in respect of the trust for the 2016‑17 income year; (ii) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year; and (d) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and #### 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑125(3)(a), the trust makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the trust’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Section 295‑400 of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). (a) unless paragraph (b) applies—1 minus the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997; or (b) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage worked out by subtracting the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year from 100%. This Subdivision applies to an entity that is the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust. For the purposes of this Subdivision, an asset is a 30 June 1988 asset of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust if the entity owned it at the end of 30 June 1988. > Note: Section 295‑90 of the Income Tax Assessment Act 1997 treats these assets as having been acquired on 30 June 1988. (1) The first element of the cost base of each 30 June 1988 asset of the entity’s is the greater of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). (2) The first element of the reduced cost base of each 30 June 1988 asset of the entity’s is the lesser of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). the market value of the asset as at the end of 30 June 1988 is the average of the highest and lowest trade prices for identical assets recorded on 30 June 1988 in whichever of the following markets is applicable: (d) if, on that date, there was a State capital city market (other than the Sydney market) that recorded a higher volume of trading than the Sydney market in identical assets—that State capital city market; (2) For the purposes of this section, an asset is taken to have been listed on an Australian stock exchange on 30 June 1988 if, and only if, on that day the asset had the status of having been granted official quotation by a securities exchange within the meaning of the former Securities Industry Act 1980 or the law of a State or Territory corresponding to that former Act. (b) at any time during the period commencing at the time when the shares were acquired and ending at the end of 30 June 1988, the company paid an amount that was not a dividend to the entity in respect of the shares; (b) at any time during the period commencing at the time when the interest or unit was acquired and ending at the end of 30 June 1988, the trustee of the trust paid an amount to the entity in respect of the interest or unit, being: (i) in a case where the entity was exempt from tax for the year of income in which the payment was made—an amount that, if the entity had not been exempt from tax, would not have been the entity’s assessable income; or the cost base to the entity of the interest or unit as at 30 June 1988 is reduced by so much of the amount as is not attributable to a deduction allowed under former Division 10C or 10D of the Income Tax Assessment Act 1936. (1) Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (2) and (3) of this section apply if an entity exercises rights or options as mentioned in that section to acquire: (b) the greater of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (b) the lesser of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (4) The payment referred to in subsection (2) or (3) can include giving property. To the extent that the payment does, use the market value of the property in working out the amount of the payment. (1) A notice given under subsection 82AAT(1A) or (1CB) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑170 of the Income Tax Assessment Act 1997. (2) A notice given under subsection 82AAT(1C) or (1CD) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑180 of the Income Tax Assessment Act 1997. (1) A proportion of the ordinary income and statutory income of a continuously complying fixed interest ADF of an income year that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).  > Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the income year. > Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the income year. (4) A choice for the purposes of the definition of reckoning time in subsection (5) must be made on or before the date of lodgment of the income tax return of the ADF for the income year to which the choice relates, or before a later day allowed by the Commissioner. > continuously complying fixed interest ADF, in relation to an income year (the current year), means a fund that is a fixed interest complying ADF in relation to each of the following years: > current 25 May balance, in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time: (b) subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 September 1989 is to be added to the balance; (b) a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that day, made a deposit with the ADF that consisted wholly or partly of the roll‑over (as defined in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 as in force on that day) of an eligible termination payment as so defined, being an eligible termination payment that included a concessional component (as so defined). > fixed interest complying ADF, in relation to a year of income, means a complying ADF where both of the following conditions are satisfied: (a) not less than 90% of the amount that, apart from this section, would be the assessable income of the ADF of the income year (other than non‑arm’s length income or amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997) consists of any one or more of the following: (ii) any profit arising on the disposal, redemption, cancellation or maturity of a CGT asset referred to in paragraph 295‑85(3)(b) of the Income Tax Assessment Act 1997; (iii) an amount included in assessable income under Division 16E of Part III of the Income Tax Assessment Act 1936 (or would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply); (ii) virtual PST life insurance policies (as defined in the Income Tax Assessment Act 1997) issued by a life insurance company. > original 25 May balance, in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988. > reckoning time, in relation to an ADF in relation to an income year, means the beginning of the income year, or such other time during the income year as the ADF chooses in accordance with subsection (4). (6) This section does not apply to an ADF in relation to an income year unless the whole of the benefit that would accrue to the ADF from the application of this section in relation to the income year has been, or can reasonably expected to be, passed on to eligible depositors. An election made by the trustee of a complying superannuation fund under subsection 279(4) of the Income Tax Assessment Act 1936 that had effect for the income year of the fund in which 30 June 2007 occurs continues to have effect as if it had been made under section 295‑465 of the Income Tax Assessment Act 1997. Subdivisions 295‑I (no‑TFN contributions) and 295‑J (Tax offset for no‑TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006‑2007 income year ends on a day (the end day) after 1 July 2007 as if: (b) the entity’s no‑TFN contributions income for the entity’s 2007‑2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007‑2008 income year if the contributions concerned had been made in the entity’s 2007‑2008 income year. (2) Division 301 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section because you are a member of the fund in the same way as it would apply if the payments were superannuation member benefits paid to you from a complying superannuation fund. For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. Subdivision 301‑F of the Income Tax Assessment Act 1997 applies in relation to income years starting on or after 1 July 2007. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to the following in respect of an income year that starts on or before 1 July 2021: (b) the amendments of the Income Tax Assessment (1997 Act) Regulations 2021 made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023. (a) a superannuation benefit (the trigger benefit) was paid to a person in the 2020‑21 income year or an earlier income year; and (c) the trigger benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; and (2) The Commissioner cannot amend an assessment on the basis that a superannuation benefit paid to the person is a superannuation income stream benefit because of the amendments made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 if: (iii) the superannuation benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (a) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (b) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. (1) The Minister may, by legislative instrument, make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions) that: (a) relate to the amendments or repeals made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023; and (2) Without limiting subsection (1), rules made under this section before the end of the period of 12 months starting on the day that Schedule commences may provide that provisions of that Schedule, or any other Act or instrument, have effect with any modifications prescribed by the rules. Those provisions then have effect as if they were so modified. (2) Division 302 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section after another person’s death, because the other person was a member of that fund, in the same way as it would apply if the payments were superannuation death benefits paid to you from a complying superannuation fund. For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if: (b) just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. (2) For the purposes of Subdivision 82‑B of Division 82, Division 302 and section 303‑5 of the Income Tax Assessment Act 1997, the definition of death benefits dependant in section 302‑195 of that Act applies as if paragraphs (a) and (b) of the definition were replaced with the following paragraphs: (a) a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008 or a person who was formerly such a spouse; or (b) a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008, who is aged less than 18. (ii) a superannuation guarantee payment, a small superannuation account payment, an unclaimed money payment, a superannuation co‑contribution benefit payment or a superannuation annuity payment. (2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you at a time in the period: (i) a condition of release specified in item 107A or 207AA of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; or (ii) a condition of release specified in item 109AA of the table in Schedule 2 to the Retirement Savings Accounts Regulations 1997. (1) This section applies to a superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with section 292‑80B. (2) The superannuation benefit is not assessable income and is not exempt income to the extent that it does not exceed the amount mentioned in subsection (3). (3) The amount is the amount of excess non‑concessional contributions stated in the release authority in accordance with paragraph 292‑80A(3)(a), reduced (but not below zero) by the amount of any superannuation benefit that was not assessable income and not exempt income under a previous operation of subsection (2) in relation to the release authority. (4) The superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3). (a) you have an interest in a FIF (within the meaning of Part XI of the Income Tax Assessment Act 1936, as in force just before the commencement of item 37 of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010) (the paying fund); and (b) Subdivision 305‑B of the Income Tax Assessment Act 1997 applies in relation to the paying fund (see section 305‑55 of that Act); and (c) the paying fund transfers an amount to a complying superannuation fund in respect of you during the deduction year; and (d) you choose under section 305‑80 of the Income Tax Assessment Act 1997 that the amount, or part of the amount, is to be treated as assessable income of the complying superannuation fund; and (e) immediately before the transfer happens, there is a post‑FIF abolition surplus (within the meaning of the Income Tax Assessment Act 1936) for the paying fund in relation to you; and For the purposes of the definition of specified roll‑over amount in the Income Tax Assessment Act 1997, treat the taxable component of a directed termination payment (within the meaning of section 82‑10F) as the element untaxed in the fund of a superannuation benefit that is a roll‑over superannuation benefit. (1) This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007. > Note: This section also applies to an income stream replacing an earlier one because of an involuntary roll‑over (see section 307‑127). (2) Despite subsection 307‑125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows: (a) first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007); (b) next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits. The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit. (3) Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened: (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day; (ba) the holder of the superannuation interest is aged 60 or above on 1 July 2007, if none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day. (a) treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and (b) work out the tax free component of the superannuation interest for the purposes of section 307‑125 of the Income Tax Assessment Act 1997 under subsections (6) and (6A). (i) an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and (ii) the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time; (b) next, work out the unused undeducted purchase price (within the meaning of paragraph (a) of the definition of that term in subsection 27A(1) of the Income Tax Assessment Act 1936 just before the commencement of this section, and disregarding paragraphs (b) and (c) of that definition) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007; (c) next, work out the pre‑July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this section) of the eligible termination payment. (a) at least one superannuation income stream benefit was paid from the superannuation income stream before 1 July 1994; or (b) section 27AAAA of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007) applied to the superannuation income stream just before 1 July 2007; (7) For the purposes of paragraph (6)(c), disregard the value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment. (8) If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as: (b) if 1 or more other events mentioned in subsection (3) happened before the commutation—the time just before the earliest of those events happens. (a) references in that section to the later income stream (in relation to a time, or event happening, before the payment of that involuntary roll‑over superannuation benefit) include references to the earlier income stream; and (b) references in that section to the superannuation interest supporting the later income stream (in relation to a time, or event happening, before the payment of that benefit) include references to the earlier interest. (1) This section applies for the purposes of working out the amount of your total superannuation balance just before 1 July 2017. (2) The transfer balance mentioned in paragraph 307‑230(1)(b) of the Income Tax Assessment Act 1997 just before 1 July 2017 is taken to be equal to: (a) the sum of the transfer balance credits (if any) in your transfer balance account just after the start of 1 July 2017; less (b) the sum of the transfer balance debits (if any) arising in your transfer balance account on 1 July 2017 under item 4 of the table in subsection 294‑80(1) of that Act (about payment splits). (1) Section 307‑231 of the Income Tax Assessment Act 1997 applies in relation to borrowings that arise under contracts entered into on or after 1 July 2018. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2018 is treated as if it arose under a contract entered into before 1 July 2018 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) treat a deduction made under former section 279 of the Income Tax Assessment Act 1936 as having been made under section 295‑465 of the Income Tax Assessment Act 1997 instead; and (b) treat a deduction made under former section 279B of the Income Tax Assessment Act 1936 as having been made under section 295‑470 of the Income Tax Assessment Act 1997 instead. If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007‑2008 income year is, despite subsection 307‑345(1), the total of: (b) the amount by which $140,000 exceeds the upper limit for the 2006‑2007 income year (worked out under section 159SG of that Act). Division 316 of the Income Tax Assessment Act 1997 applies in relation to demutualisations occurring on or after 1 July 2008. If: (a) any assets held by the benefit funds of a life insurance company that is a friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a complying superannuation fund; and (b) the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer; the transfer is disregarded for any purposes of the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936. (1) In working out the amount that a life insurance company can deduct, in respect of life insurance policies that are disability policies (other than continuous disability policies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income. (2) In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection (1) applies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company’s liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320‑85(4) of that Act. If: (2) If the life insurance company wishes to include a part of an approved asset in its virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑87(2) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society establishes a virtual PST in the 2000‑01 income year, the calculation of the transfer values of the company’s virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year. (1) Subsection (3) applies for the purposes of subparagraph (b)(i) of the definition of virtual PST life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 259 of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007. (2) Subsection (3) also applies for the purposes of subparagraph (b)(i) of the definition of complying superannuation/FHSA life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 47 of Schedule 7 to the First Home Saver Accounts (Consequential Amendments) Act 2008. (3) Treat an annuity as having been purchased out of a superannuation lump sum or an employment termination payment, if the annuity was purchased: (b) out of an eligible termination payment (within the meaning of the Income Tax Assessment Act 1997, as in force just before the commencement mentioned in subsection (1) of this section). (2) If the life insurance company wishes to include a part of an approved asset in its segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (a) a life insurance company had a liability before 1 July 2000 under a life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and (c) there is a transfer of the company’s assets to the segregated exempt assets to meet that liability or that part of the liability; (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑105(1) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320‑225 of the Income Tax Assessment Act 1997 in the 2000‑01 income year, the calculation of the transfer values of the company’s segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year. Section 322‑25 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Part VC of the Insurance Act 1973 after 17 October 2008. 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you > new Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force after the commencement of this section. > old Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. > STS taxpayer means an STS taxpayer within the meaning of Division 328 of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. #### 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years (1) This section applies for the purpose of working out whether you are a small business entity (other than because of subsection 328‑110(4) of the Income Tax Assessment Act 1997) for the 2007‑08 or 2008‑09 income year. (2) You work out your aggregated turnover for the 2005‑06 or 2006‑07 income year as if the amendments made by Schedule 1 to the Tax Laws Amendment (Small Business) Act 2007 had been in force in relation to that year. (a) your aggregated turnover for the 2005‑06 income year (worked out in accordance with subsection (2)) is $2 million or more; but (b) your STS group turnover for that year (worked out under Subdivision 328‑F of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section) is less than $2 million. (2) The following provisions apply as if you are a small business entity for the income year in which you are winding up the business: #### 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you (1) For the purpose of working out whether you are a small business entity for the 2007‑08, 2008‑09, 2009‑10 or 2010‑11 income year (each a relevant income year) for the purposes of a provision to which subsection (3) applies: (2) An entity (the first entity) controls a discretionary trust for a relevant income year if, for any of the 4 income years (a previous income year) before that year: (a) if the previous income year is before the 2007‑08 income year—the trustee of the trust made a distribution of $100,000 or more to the first entity, any of its affiliates, or the first entity and any of its affiliates; or (i) the trustee of the trust paid to, or applied for the benefit of, the first entity, any of the first entity’s affiliates, or the first entity and any of its affiliates, any of the income or capital of the trust; and (ii) the percentage (the control percentage) of the income or capital paid or applied is at least 40% of the total amount of income or capital paid or applied by the trustee for that year. (1) This section sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (2) This section also sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (3) Any ordinary income that, apart from paragraph 328‑105(1)(a) of the Income Tax Assessment Act 1997 (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have derived before the changeover year (while you were using the STS accounting method) and you have not included in your assessable income because you have not received it is included in your assessable income for the changeover year. (4) Any general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, that, apart from paragraph 328‑105(1)(b) of that Act (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have incurred before the changeover year (while you were using the STS accounting method) and that you have not deducted because you have not paid them can be deducted for the changeover year. (b) for any later income year for which you are a small business entity but only if you used the STS accounting method for the income year before that later year. > Note: Example: You are a small business entity for the 2007‑08 and 2008‑09 income years and you continue to use the STS accounting method for those years. You are not a small business entity for the 2009‑10 income year so you cannot continue to use the STS accounting method for that year. Because you cannot use the STS accounting method for the 2009‑10 income year, you will not be able to use it again for a later income year even if you are a small business entity for that later year. In sections 328‑115 and 328‑120, STS accounting method means the accounting method that was required by the Income Tax Assessment Act 1997 to be used by STS taxpayers for the 2004‑05 income year. (b) you made a choice under subsection 328‑175(3) of old Subdivision 328‑D in relation to a depreciating asset you use to carry on a primary production business and for which you could deduct amounts under Subdivision 40‑F or 40‑G of the Income Tax Assessment Act 1997. (2) In determining whether you can choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997 in an increased access year, disregard subsection 328‑175(10) of that Act. (3) In applying paragraph 328‑175(10)(b) of that Act for the purpose of determining whether you can choose to use that Subdivision in any income year after the increased access years, disregard: (4) Paragraph 328‑180(1)(b) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that paragraph to $1,000: (i) first used the asset, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (i) first used the asset, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (i) first used the asset, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, on or after 1 July 2023 and on or before 30 June 2026. (a) a reference in that paragraph to the end of the income year in which you start to use the asset, or have it installed ready for use, for a taxable purpose were a reference to the earlier of: if: (i) first used the asset, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021. (5) Paragraph 328‑180(2)(a) or (3)(a) of the Income Tax Assessment Act 1997 applies to an amount included in the second element of the cost of an asset as if a reference in that paragraph to $1,000: (5A) For the purposes of determining whether, under subsection 328‑180(2) of the Income Tax Assessment Act 1997, you can deduct, for an income year (the current year), the taxable purpose proportion of an amount included in the second element of the cost of an asset, disregard paragraph (b) of that subsection if: (2) For the purposes of determining whether subsection 328‑180(1) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (b) of that subsection (which sets a limit of $1,000 on the cost of the asset) if, in the period beginning at the 2020 budget time and ending on 30 June 2023, you: (3) For the purposes of determining whether subsection 328‑180(2) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (a) of that subsection (which sets a limit of $1,000 on the amount) if the amount is included in the second element of the cost of the asset at any time in the period beginning at the 2020 budget time and ending on 30 June 2023. (4) In applying paragraph 328‑180(3)(a) of the Income Tax Assessment Act 1997 to an asset, disregard an amount included in the second element of the cost of the asset if the amount is deducted under subsection 328‑180(2) of that Act, as modified by subsection (3) of this section. (5) Section 328‑210 of the Income Tax Assessment Act 1997 applies as if the words “less than $1,000 but” in subsection (1) were disregarded, in relation to a deduction for an income year that ends: Subsection 328‑190(2) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that subsection to 15% were a reference to 57.5% if you are covered by section 40‑125 for the asset (which is about backing business investment). (1) A depreciating asset of yours that had been allocated to your general STS pool is treated as being allocated to your general small business pool. (2) A depreciating asset of yours that had been allocated to your long life STS pool is treated as being allocated to your long life small business pool. (3) If you made a choice, under subsection 328‑185(5) of old Subdivision 328‑D, not to have a depreciating asset allocated to your long life STS pool, the choice has effect for the purposes of subsection 328‑185(5) of new Subdivision 328‑D. (1) This section applies if a depreciating asset of yours is treated as being allocated to your general small business pool or long life small business pool under section 328‑185. (2) The opening pool balance of your general small business pool or long life small business pool for the 2007‑08 income year is taken to be the closing pool balance of your general STS pool or long life STS pool, as the case requires, for the 2006‑07 income year, reduced or increased by any adjustment required under section 328‑225 of new Subdivision 328‑D (about change in the business use of an asset). (a) you were not an STS taxpayer for the 2006‑07 income year (because you stopped being an STS taxpayer before that time); but (b) you are a small business entity for the 2007‑08 income year or a later income year and you choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets for that income year; the opening pool balance of your general small business pool or long life small business pool includes the sum of the taxable purpose proportions of the adjustable values of depreciating assets allocated to the pool under subsection 328‑185(3) of new Subdivision 328‑D for that year. (1) This section applies for the purposes of applying Subdivision 328‑D of the Income Tax Assessment Act 1997 for the 2012‑13 income year and later income years. (2) A depreciating asset that had been allocated to your long life small business pool is treated as being allocated to your general small business pool. (a) the closing pool balance of your general small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under section 328‑225 of that Act; and (b) the closing pool balance of your long life small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under that section. (1) This section applies if you chose to stop being an STS taxpayer for the 2005‑06 income year or the 2006‑07 income year. (2) You cannot choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets until at least 5 years after the income year for which you chose to stop being an STS taxpayer. > Note: Subdivision 328‑D of the Income Tax Assessment Act 1997 continues to apply to depreciating assets that have been allocated to your small business pools even if you are not a small business entity, or do not choose to use that Subdivision, for an income year: see section 328‑220 of that Subdivision. (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct 20% of particular expenditure for your 2023‑24 income year if: (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (d) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑450 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (6) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (ii) if the provider is a registered body of a kind listed in paragraph (2)(b), (c) or (d)—the training is within the provider’s scope of registration for that kind of registered body; and (d) each enrolment, or arrangement, for the provision of the training is made or entered into at or after 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022; and > Note: Paragraphs (b) and (c) mean this section will not apply to expenditure for on‑the‑job training or training provided by you in house. (a) a registered higher education provider (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); (b) a NVR registered training organisation (within the meaning of the National Vocational Education and Training Regulator Act 2011); (c) a registered education and training organisation (within the meaning of the Education and Training Reform Act 2006 (Vic.)); (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct for your 2023‑24 income year an amount that is equal to the sum of: (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (3) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑460 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (4) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (b) you incur the expenditure in the period starting at 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022 and ending at the end of: (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (4) For the purposes of paragraphs (1)(c) and (2)(c), in working out whether you can deduct an amount of expenditure on a depreciating asset, assume that: (b) throughout that effective life, you will use the asset for a taxable purpose to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose. (a) 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑470(1) or (3) applies in relation to the income year; and > Note: The deduction relates to the period of 1 July 2023 to 30 June 2024. An entity may have deducted an amount under paragraph (a) for a previous income year if the entity has a substituted accounting period. (2) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑470 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (3) Sections 8‑10, 40‑215 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (c) you start to use the asset, or have it installed ready for use, for any purpose after 30 June 2023 but before 1 July 2024; and (d) you start to use the asset, or have it installed ready for use, for a taxable purpose at a time (the start time) that is: (e) you are a small business entity, or an entity covered by subsection (4), for the income year that includes the start time; and (h) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) a new reasonably comparable depreciating asset that uses a fossil fuel (other than a use of which that is merely incidental) is available in the market at the start time; (ii) if the asset is being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than the other asset; (iii) if the asset is not being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than a new reasonably comparable depreciating asset that is available in the market at the start time; or (i) a depreciating asset (other than an asset excluded under subsection (6)) that uses electricity, or energy that is generated from a renewable source, to be more energy efficient; (iv) the use of electricity, or energy that is generated from a renewable source, by another depreciating asset to be monitored. (a) the amount is included in the second element of a depreciating asset’s cost under paragraph 40‑190(2)(a) of the Income Tax Assessment Act 1997; and (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (d) you are a small business entity, or an entity covered by subsection (4), for the income year in which the expenditure is incurred; and (i) if the asset could use a fossil fuel (other than a use of which that is merely incidental)—the asset to only use electricity, or energy that is generated from a renewable source; (ii) if the asset uses electricity, or energy that is generated from a renewable source—the asset to be more energy efficient; (g) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) For the purposes of paragraph (1)(b) or (3)(b), in working out whether you can deduct an amount of expenditure assume that: (i) for the purposes of paragraph (1)(b)—to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose; or (ii) for the purposes of paragraph (3)(b)—to the same extent as you use it for a taxable purpose in the income year in which the expenditure is incurred. (b) expenditure (other than expenditure referred to in subparagraph (3)(e)(i)) on an asset that can use a fossil fuel (other than a use of which that is merely incidental); (c) an asset that solely or predominantly generates electricity from a renewable source (for example, photovoltaic cells) or expenditure on such an asset; (d) an asset, or expenditure, being capital works for which you can deduct an amount under Division 43 of the Income Tax Assessment Act 1997; > Note: Subsections (1) and (3) also do not apply to an item of trading stock because such an asset is not a depreciating asset: see section 40‑30 of the Income Tax Assessment Act 1997. A reference in each of the following provisions of the Income Tax Assessment Act 1997 to a registration under section 27A of the Industry Research and Development Act 1986 includes a reference to a registration under former section 39J of that Act: (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) the R&D entity cannot deduct an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from: (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D entity could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:22pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the R&D entity is taken to be able to deduct under subsection 355‑315(2) of the new Act that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the R&D entity’s assessable income for the event year under subsection 355‑315(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 for the asset, the R&D entity is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑446 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the R&D entity is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑465 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: Section 355‑315 of the new Act would otherwise apply for the event in a case where the R&D entity had new law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by an R&D partnership; and (i) the partner can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the partner chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D partnership could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the partner is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:21.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D entity</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D partnership</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the partner is taken to be able to deduct under subsection 355‑525(2) of the new Act the partner’s proportion of that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the partner’s assessable income for the event year under subsection 355‑525(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partner’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if one or more partners (including the partner) in the R&D partnership is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset, the partner is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑448 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the partner is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑467 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s deductions under section 355‑520 of the new Act mentioned in subsection (4A) of this section. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the partner for the event, do so apply to the partner for the event. > Note 1: Section 355‑525 of the new Act would otherwise apply for the event in a case where the partner had new law deductions. Item 7 of the table in subsection 57‑110(2) in Schedule 2D to the Income Tax Assessment Act 1936 applies as if the deduction rules set out in the final column of that item also included former sections 73BA and 73BH of the Income Tax Assessment Act 1936. For the purposes of step 1 of the method statement in subsection 355‑415(2) of the Income Tax Assessment Act 1997, also disregard amounts that have already been taken into account under former subsection 73B(14AA) of the Income Tax Assessment Act 1936 for the R&D entity, the grouped entity and the R&D activities for an earlier income year. (1) This section applies if, apart from former paragraph 73B(10)(a) of the Income Tax Assessment Act 1936, an eligible company could deduct advance R and D expenditure in one or more income years commencing on or after 1 July 2011. > Note: That deduction would be under former section 73B of that Act as that former section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (a) apart from Subdivision H (prepaid expenditure) of Division 3 of Part III of the Income Tax Assessment Act 1936, an eligible company can deduct an amount under former section 73B, 73BA, 73BH, 73QA, 73QB or 73Y of that Act for an income year commencing before 1 July 2011; and (c) apart from former paragraph 73B(10)(a) of that Act, the eligible company could deduct an amount, as a result of that application of that Subdivision, for an income year commencing on or after 1 July 2011. > Note: That deduction would be under that Act as it applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (3) Former paragraph 73B(10)(a) of that Act is taken to apply to those income years commencing on or after 1 July 2011 as if the reference in that former paragraph to section 39J of the Industry Research and Development Act 1986 were a reference to section 27A of that Act. (4) An expression used in this section that is also used in former section 73B of the Income Tax Assessment Act 1936 has the same meaning in this section as it has in that former section. This Subdivision applies to core technology (within the meaning of former section 73B of the Income Tax Assessment Act 1936) if: (a) you incurred core technology expenditure (within the meaning of that former section) in an income year commencing before 1 July 2011 in relation to the core technology under one or more contracts entered into at or after the time referred to in former subsection 73B(12) of that Act; and (b) that expenditure (the undeducted expenditure) cannot be deducted for the last income year commencing before 1 July 2011. (1) This section applies for the purposes of Division 40 of the Income Tax Assessment Act 1997, other than sections 40‑292 and 40‑293 of that Act, if the core technology (the asset) is a depreciating asset. (2) Disregard this section, including its effect on the amount you can deduct under section 40‑25 of that Act for the asset, for the purposes of working out: (3) The asset’s opening adjustable value for the first income year that commences on or after 1 July 2011 (the first new income year) is equal to the amount of the undeducted expenditure. (4) Subsection 40‑75(2) of the Income Tax Assessment Act 1997 applies to the asset as if the first new income year were a change year (within the meaning of that subsection). If the core technology is not a depreciating asset, you can deduct the undeducted expenditure in equal proportions over a period of 5 income years starting in the first income year commencing on or after 1 July 2011. To work out the film component (if any) of your tax loss for the 1997‑98 income year or a later income year, apply former section 375‑805 of the Income Tax Assessment Act 1997. If you incurred a film loss for the purposes of former section 79F (Film losses of 1989‑90 to 1996‑97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989‑90 to 1996‑97 income years, that film loss is the film component of your tax loss for that income year. (1) To work out your film loss (if any) for the purposes of the Income Tax Assessment Act 1997 for the 1989‑90 or a later income year, apply former section 375‑810 of that Act. (2) You can deduct in the 1997‑98 or a later income year your film loss for any of the 1989‑90 to 1996‑97 income years only to the extent that it has not already been deducted. (1) Division 392 of the Income Tax Assessment Act 1997 applies to assessments for the 1998‑99 income year and later income years. (a) it had applied to your assessment for each income year before the 1998‑99 income year for which Division 16 of Part III of the Income Tax Assessment Act 1936 applied in relation to your income; and (b) you had carried on a primary production business during each income year before the 1998‑99 income year when you carried on a business of primary production; and (c) for each income year before the 1998‑99 income year you had a basic taxable income equal to your taxable income for the income year for the purposes of Division 16 of Part III of the Income Tax Assessment Act 1936. > Note: Section 149A of the Income Tax Assessment Act 1936 identifies what your taxable income for an income year is for the purposes of Division 16 of Part III of that Act. Division 392 of the Income Tax Assessment Act 1997 does not apply to your assessment for the 1998‑99 income year or a later income year if you made an election under section 158A (Election that Division not apply) of the Income Tax Assessment Act 1936 relating to an income year before the 1998‑99 income year. 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 A reference in Division 393 of the Income Tax Assessment Act 1997 to a deduction under section 393‑5 of that Act for making a farm management deposit is taken to include a reference to a deduction under section 393‑10 in Schedule 2G to the Income Tax Assessment Act 1936, as in force just before the commencement of this section, if the deposit was made before the 2010‑11 income year. #### 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 (b) the deposit was made with an FMD provider as a result of a request to which section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, applied; the unrecouped FMD deduction in respect of the deposit at that time is equal to the amount of the unrecouped deduction (within the meaning of the former subsection 159GA(3) of the Income Tax Assessment Act 1936) in respect of the deposit immediately before it ceased to be a deposit under the Loan (Income Equalization Deposits) Act 1976. > Note: This means that the unrecouped deduction relating to the deposit under the Loan (Income Equalization Deposits) Act 1976 continues to apply (by becoming an unrecouped FMD deduction) when the deposit is transferred to an FMD provider as a farm management deposit. The Loan (Income Equalization Deposits) Act 1976 was repealed on 22 February 2005. If a beneficiary of a trust was covered by paragraph (c) of the definition of primary producer in section 393‑25 in Schedule 2G to the Income Tax Assessment Act 1936 in the 2009‑10 income year, treat subsection 393‑25(3) of the Income Tax Assessment Act 1997 as having applied to the beneficiary for the purpose of determining the maximum number of choices that the trustee may make under subsection 393‑27(2) of that Act for the 2010‑11 income year. (a) a farm management deposit of an owner was unclaimed moneys for the purposes of section 69 of the Banking Act 1959; and (2) For the purpose of subsection 393‑10(1) of the Income Tax Assessment Act, treat the repaid unclaimed moneys as a repayment of the deposit of the owner. (3) To avoid doubt, the payment of unclaimed moneys to the Commonwealth under section 69 of the Banking Act 1959 is not a repayment of the deposit of the owner for the purposes of Division 393 of the Income Tax Assessment Act 1997. 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 #### 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 If a farm management deposit was made with an FMD provider as a result of a request under section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, then: (a) subsections 393‑40(1) to (4) of the Income Tax Assessment Act 1997 apply as if the day the deposit was made was the day on which the deposit was originally made under the Loan (Income Equalization Deposits) Act 1976; and (1) A copyright collecting society to which section 51‑43 of the Income Tax Assessment Act 1997 applies, may elect that, from 1 July 2004, the section apply to all ordinary income, and statutory income, collected or derived by the society on or after 1 July 2004. Division 420 of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division. Subdivision 615‑C of the Income Tax Assessment Act 1997 applies to you with the modifications set out in this Subdivision if you chose to obtain a roll‑over involving \*shares or units that: (b) were your trading stock, or revenue assets, at the time immediately before that disposal, redemption or cancellation. (1) Disregard subparagraph 615‑45(a)(ii), and paragraph 615‑45(b), of the Income Tax Assessment Act 1997 if the roll‑over relates to \*shares that were disposed of, redeemed or cancelled. (2) For each of the \*shares in the interposed company that you acquired in return for those of your shares or units in the original entity that were your \*trading stock at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  (2) For the purpose of calculating any profit or loss on a future disposal, cessation of ownership, or other realisation of a \*share in the interposed company that you acquired in return for those of your shares or units in the original entity that were \*revenue assets at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  Subdivision 620‑A of the Income Tax Assessment Act 1997 applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. (1) Part 3‑90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Act (No. 1) 2002 and amended by: (2) Section 713‑50 of the Income Tax Assessment Act 1997 (about factors to consider in determining destination of distribution by non‑fixed trust) applies for the purposes of this Part in the same way as it applies for the purposes of Part 3‑90 of that Act. ### Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly‑owned subsidiary of the entity (the future head company) that became the head company of the group; or (ii) at some time during that period, the entity was a wholly‑owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (ii) it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (1) If a group is a transitional group, its head company may, subject to subsection (3), choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (3) If the choice is to be made after the end of the period mentioned in paragraph (2)(a) and before the end of the day mentioned in paragraph (2)(b), it cannot be made unless each entity in relation to which the conditions in subsection (5) are satisfied has agreed to it being made. (a) the entity (the leaving entity) ceased to be a subsidiary member of the group before the choice was made (in a subsection (3) case) or before the revocation took place (in a subsection (4) case); and (b) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; and (c) the asset had become that of the head company because that section applied when a chosen transitional entity (whether or not the same entity as the leaving entity) became a subsidiary member. Section 716‑855 applies for the purposes of this Division in the same way as that section applies for the purposes of Part 3‑90 of the Income Tax Assessment Act 1997. is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705‑B of that Act and with this Division. 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity Section 701‑10 (cost to head company of assets of joining entity) and subsection 701‑35(4) (setting value of trading stock at tax‑neutral amount) of the Income Tax Assessment Act 1997 do not apply to the assets of a chosen transitional entity. > Note: The fact that the head company inherits the entity’s history under section 701‑5 of that Act when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time. #### 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities (2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non‑chosen subsidiary) is worked out in a special way. (b) for each sub‑group (see subsection (6)) that exists in relation to the non‑chosen subsidiary—the sub‑group’s notional allocable cost amount (see subsection(5)) for the non‑chosen subsidiary. (4) The head company adjusted allocable amount for the non‑chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if; (b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of head company’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub‑group in relation to the non‑chosen subsidiary. (5) For each sub‑group that exists in relation to the non‑chosen subsidiary, there is a sub‑group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non‑chosen subsidiary if: (a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non‑chosen subsidiary and the entities comprising the sub‑group; and (c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub‑group membership interests (see subsection (6)) in relation to the sub‑group, and any such entity held those membership interests during the period when it actually held them; and (d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of chosen transitional entity’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub‑group. (6) If a chosen transitional entity holds membership interests in a non‑chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non‑chosen subsidiary: (a) the chosen transitional entity and each interposed non‑chosen subsidiary comprise a sub‑group in relation to the non‑chosen subsidiary (unless the non‑chosen subsidiary is included in a sub‑group in relation to another non‑chosen subsidiary); and (i) the membership interests that the chosen transitional entity holds directly in the non‑chosen subsidiary or in any of the interposed non‑chosen subsidiaries; (ii) the membership interests that each interposed non‑chosen subsidiary holds directly in the non‑chosen subsidiary or in any of the other interposed non‑chosen subsidiaries. #### 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities If any provision of the Income Tax Assessment Act 1997 would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply. > Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred. (1) This section has effect for the purposes of applying section 705‑70 (step 2 of allocable cost amount) of the Income Tax Assessment Act 1997 in relation to a transitional entity. (2) In spite of subsection 705‑70(1A) of that Act, if the amount of an accounting liability of the transitional entity would be different when it becomes an accounting liability of the transitional group, that difference is not taken into account in working out the amount of the liability. #### 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different (a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset (the roll‑over asset) for which there was: (ii) roll‑over relief under section 40‑340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and (i) became an asset of the head company when the transitional group came into existence because subsection 701‑1(1) (the single entity rule) of that Act applies; or differs at that time from what it would have been if the act, transaction or event that gave rise to the CGT event had not occurred in relation to the roll‑over asset; then the provisions mentioned in subsection (2) apply as if the act, transaction or event had not occurred in relation to the roll‑over asset. (a) the act, transaction or event mentioned in subsection (1) happened before a demerger and in connection with the demerger; and (b) before the transitional group came into existence, at least one of the following entities ceased to be a member of the demerger group because of the demerger: (i) the originating company in relation to the roll‑over, or the transferor in relation to the roll‑over relief, was a foreign resident; and (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as a transitional foreign‑held subsidiary of the group. #### 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets (1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied. (2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset. (a) the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and (b) former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset. (4) The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group. (6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses. #### 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets (b) just before the transitional group came into existence, the entity that became the head company held a pre‑CGT asset; and (d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre‑CGT asset and is held by the head company only because the entity is taken by subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company. (2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence. #### 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity (1) This section provides for an addition to the step 1 amount for working out under section 711‑20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity) that ceases to be a subsidiary member of the transitional group at a time (the leaving time), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701‑1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount for paragraph</span><span> </span><span>(2)(c)</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">If, because of the circumstances described in paragraphs</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(a) and (b):</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">The amount is:</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:180.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following provisions applied to the entity:</span></p><p class="Tablea"><span>(a) former section</span><span> </span><span>61A of the </span><span style="font-style:italic">Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(b) former Subdivision</span><span> </span><span>57</span><span>‑</span><span>I in Schedule</span><span> </span><span>2D to the</span><span style="font-style:italic"> Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(c) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(4) of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td><td style="width:148.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the amount treated as being the cost of the asset under that provision; and</span></p><p class="Tablea"><span>(b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>2</span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following subsections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span><span> applied to the entity:</span></p><p class="Tablea"><span>(a) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(5);</span></p><p class="Tablea"><span>(b) 58</span><span>‑</span><span>70(3)</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The amount treated as being the cost, or the first element of the cost, of the asset under that subsection</span></p></td></tr></tbody></table> ``` (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997, as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="4" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amounts and provisions for different dates of acquisition</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Date of the acquisition</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Amount</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Provision of Division</span><span style="font-weight:bold"> </span><span style="font-weight:bold">58 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> applying to the acquisition and the working out of the amount</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:76.7pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>160</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>220</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>After 30</span><span> </span><span>June 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>First element of the cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subsection</span><span> </span><span>58</span><span>‑</span><span>70(5)</span></p></td></tr></tbody></table> ``` > Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. > Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and ### Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: #### 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70‑45 to 70‑70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420‑51 to 420‑58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (a) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority‑owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority‑owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority‑owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority‑owned entity became a subsidiary member of the group, there was roll‑over relief under section 40‑340 of the Income Tax Assessment Act 1997. (a) while the asset is, because subsection 701‑1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, its tax cost setting amount is taken to be equal to the continuing majority‑owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711‑30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997. (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset becomes that of an entity (a new asset holder) other than the head company because subsection 701‑1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder) acquiring some or all of the membership interests in the new asset holder; and (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset is acquired by another entity (a new asset holder) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll‑over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value asset just before the acquisition; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 #### 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 (b) members of the consolidated group or the MEC group mentioned in subsection 104‑500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701‑1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701‑1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (3) If this section applies, neither subsection 104‑500(4) nor subsection 104‑500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year. ### Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C‑B); and (b) modifies certain rules in Part 3‑90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C‑C). > Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719‑2 and 719‑10 of this Act). 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership #### 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(ii) of that Act (see subsection 719‑2(3) of this Act). (b) a trust (a non‑resident trust) that does not meet the requirements in any item of the table in section 703‑25 of the Income Tax Assessment Act 1997. (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non‑resident company or a non‑resident trust; or Test entity must be a subsidiary member on assumption that non‑resident companies and non‑resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non‑resident company or non‑resident trust were a subsidiary member of the group. (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv). #### 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(iii) of that Act (see subsection 719‑2(3) of this Act). (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C‑10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3). If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C‑10 are met; and (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (ii) an entity that is a transitional foreign‑held indirect subsidiary of the group because of another application of this paragraph; Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign‑held indirect subsidiary would need to have satisfied the set of requirements in either section 701C‑10 or 701C‑15 (1) This Subdivision applies if an entity (the transitional foreign‑held joining entity) that is a transitional foreign‑held subsidiary or a transitional foreign‑held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time) the group comes into existence. (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign‑held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign‑held indirect subsidiary that becomes a subsidiary member at that time takes account of this. (a) section 701‑10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); apply, for the purposes of setting the tax cost of an asset of the transitional foreign‑held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign‑held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. > Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign‑held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign‑held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign‑held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign‑held subsidiary and the other entity. > Note 2: If the transitional foreign‑held joining entity is a transitional foreign‑held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705‑A of the Income Tax Assessment Act 1997, in its application in accordance with Subdivision 705‑B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company. Subsection 701‑35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax‑neutral amount) does not apply to the assets of the transitional foreign‑held joining entity if it is a transitional foreign‑held subsidiary. Section 701‑15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: (a) this section applies to each membership interest in the transitional foreign‑held subsidiary that is held by an entity (an eligible non‑resident) of a kind mentioned in subparagraph 701C‑20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign‑held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701‑1(2) of the Income Tax Assessment Act 1997 applies to the eligible non‑resident in the same way as it applies to the head company. Section 711‑5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: > Note: If the leaving entity is a transitional foreign‑held subsidiary (within the meaning of section 701C‑20 of the Income Tax (Transitional Provisions) Act 1997), this Division will, in accordance with subsection 701‑15(4) of this Act (see section 701C‑40 of the first‑mentioned Act), apply to membership interests that an eligible non‑resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity. (1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707‑C of the Income Tax Assessment Act 1997. (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period. (1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if: (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (d) the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997. (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: (1) The head company of a consolidated group may make a choice in the approved form to apply section 701D‑10 to another entity. (2) However, the head company cannot make that choice if subsection 701D‑10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (a) an asset of the head company because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701‑55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40‑77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40‑77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40‑285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount. (b) after the asset became an asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). > Note: The final entity will be different from the head company if an entity (the leaving entity) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40‑285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. > Note: The final entity will be entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701‑5 (the entry history rule) of that Act and perhaps also section 701‑40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity) became a subsidiary member of the group; and It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). > Note: In some cases, section 705‑47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40‑285(3) of this Act. If: (b) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and subsection 40‑285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701‑10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997. > Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997. (1) For the purposes of Part 3‑90 of the Income Tax Assessment Act 1997, this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960‑G of that Act whether the interest or right is a membership interest of the entity in the other entity. > Note: Under Subdivision 960‑G of the Income Tax Assessment Act 1997, a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001) apply to transactions in relation to the interest or right at the relevant time. Despite the amendments of section 703‑35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) If an entity (the joining entity) to which section 40‑75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time), this Subdivision applies in relation to: (ii) became assets of the head company of the group at the joining time because of section 701‑1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure. (1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). (2) If the joining entity could not deduct an amount under Subdivision 40‑B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701‑55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40‑35, 40‑37, 40‑40 or 40‑43 treated the joining entity as holding a notional asset. > Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705‑30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. (a) deductions under former Subdivision 330‑A, 330‑C or 330‑H of the Income Tax Assessment Act 1997, or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated an entity as holding because of the expenditure. (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); > Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40‑75(4) of this Act, but may have been reset since under Subdivision 40‑B of the Income Tax Assessment Act 1997. > Note 2: The effective life of a notional asset is specified by whichever one of sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act is relevant to the notional asset. (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (9) Section 705‑55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705‑45 of that Act. > Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705‑40 of the Income Tax Assessment Act 1997. (a) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701‑5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. > Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705‑305(3). (ii) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707‑A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member. 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value #### 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707‑320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor) other than the real loss‑maker mentioned in subsection 707‑315(1) of that Act for the bundle; and (b) both the real loss‑maker and the value donor became members of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (ca) neither the real loss‑maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (ii) a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (ii) section 713‑540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (2) It must have been possible for the real loss‑maker to have transferred the loss to the value donor under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss‑maker at the initial transfer time the amount worked out using the formula:  > Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707‑327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss‑maker to the transferee. > total of real loss‑maker’s non‑foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss‑makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) included in a bundle of losses: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. #### 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value (1) This section affects the calculation of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707‑325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936, in the bundle). > Note: This section does not affect the calculation of the real loss‑maker’s modified market value for other purposes (such as the real loss‑maker being a value donor for the purposes of another application of section 707‑325 of this Act). (3) One condition is that the event was an injection of capital directly into the real loss‑maker by the value donor mentioned in section 707‑325 of this Act. (c) that would have caused subsection 707‑325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss‑maker’s modified market value (even if no other events described in subsection 707‑325(4) of that Act had occurred), apart from this section. (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss‑maker (whether or not the event also involved either the value donor or the real loss‑maker); or (1) This section has effect for the purposes of working out under Subdivision 707‑C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707‑325, as if there were added to the modified market value of the real loss‑maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (c) the loss is not a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707‑A of that Act at the initial transfer time had the company: > Note: This section has effect even if the amount added to the real loss‑maker’s modified market value under section 707‑325 is nil because the value donor’s modified market value is nil. (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707‑325, as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (4) If the transferee mentioned in subsection 707‑325(1) chooses, sections 707‑310, 707‑335 (except paragraph 707‑335(2)(a)) and 707‑340 of the Income Tax Assessment Act 1997 (and subsections 707‑315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: > Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707‑325(1)(d) and (e) and subsection 707‑325(2) in an application of section 707‑325 separate from the application of that section mentioned in paragraph (1)(a) of this section. > Note: This means that a loss that provided a basis for section 707‑325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. (b) in connection with the requirement that it must have been possible for a company (the notional transferor) to transfer to another company (the notional transferee) for an income year a loss under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997. (b) ends immediately after the initial transfer time mentioned in subsection 707‑320(1) of the Income Tax Assessment Act 1997. > Note: For the purposes of identifying the trial year using the definition in section 707‑120 of the Income Tax Assessment Act 1997, the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time. (1) Subsection (3) of this section affects the calculation, under section 707‑325 of the Income Tax Assessment Act 1997 and section 707‑325 of this Act, of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (the formation time) the group became a consolidated group; and (b) the provisions described in subsection 707‑327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707‑327(1)(b) and (c) of this Act as if the bundle included the loss; and (d) subsection 707‑325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707‑325(1) of this Act chooses that this section apply in relation to the real loss‑maker. (2) Section 707‑325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. (3) Disregard for the purposes of subsection 707‑325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707‑325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or > Note: Disregarding such an event could have a direct or indirect effect on the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss‑maker’s modified market value calculated under section 707‑325 of the Income Tax Assessment Act 1997, if the real loss‑maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707‑325 of this Act to add an amount to the real loss‑maker’s modified market value for those purposes. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) that: (b) was transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from an entity other than the real loss‑maker. (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997. Disregard an event that is described in subsection 707‑325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707‑325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004. (1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss‑maker) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time) the transferee became the head company of a consolidated group; and (ii) the conditions in one or more of paragraphs 165‑15(1)(a), (b) and (c) did not exist in relation to the real loss‑maker; and (da) the real loss‑maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non‑transferred losses) of the same sort that the transferee made without a transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non‑transferred losses). (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. <table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Limit on utilising the losses</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For this income year:</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the losses that the transferee may utilise cannot exceed:</span></p></td></tr></thead><tbody><tr><td style="width:20.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:120.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The first income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span style="font-size:8pt; vertical-align:2pt">1</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The second income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) </span><span style="font-size:8pt; vertical-align:2pt">2</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the amount of the losses utilised for the income year mentioned in item</span><span> </span><span>1</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The third income year ending after the initial transfer time, or a later income year</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time</span></p></td></tr></tbody></table> ``` (4) Subdivision 707‑C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707‑A of that Act. > Note: This has 2 effects. First, Subdivision 707‑C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707‑A of that Act). (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). (7) This section does not limit the transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company. In working out when a choice may be made under subsection 707‑325(5), 707‑327(5), 707‑328A(4) or 707‑350(5), ignore losses to which section 713‑535 of the Income Tax Assessment Act 1997 applies. > Note: That section deals with losses transferred under Subdivision 707‑A of that Act from certain wholly‑owned subsidiaries of life insurance companies that are members of a consolidated group. Section 707‑405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act. (1) This section reduces the adjustable value of a notional asset that section 40‑35, 40‑37, 40‑38, 40‑40 or 40‑43 treats the head company of a consolidated group as holding, if: (b) that section treats the leaving entity as holding a notional asset because of section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997. > Note: Section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time. The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences. (1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event) happening involving an entity (the originating entity) and another entity (the recipient entity) if: (a) the event occurs in connection with a life insurance company (the member life insurance company) becoming a member of a consolidated group; and (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest) in a company or in another trust. (a) a life insurance company transfers an asset (also the original asset) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320‑200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset) to its segregated exempt assets where, apart from this Subdivision, section 320‑255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event) is made in connection with the life insurance company (also the member life insurance company) becoming a member of a consolidated group. (1) This Subdivision applies only if the originating entity (for a section 713‑505 case) or the life insurance company (for a section 713‑510 case) chooses that it apply. (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713‑510 of the Income Tax Assessment Act 1997; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713‑510 of the Income Tax Assessment Act 1997; and (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs. This Act, and the Income Tax Assessment Act 1997, apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group. (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain) that the originating entity would have made as a result of the deferral event is disregarded; and (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount) under paragraph 320‑15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (1) This section operates if, after the deferral event happens, another event (the new event) happens where the new event is: (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (i) the original asset being transferred to or from the company’s virtual PST under section 320‑180, 320‑185 or 320‑195 of the Income Tax Assessment Act 1997; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320‑235, 320‑240 or 320‑250 of that Act; or (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. > Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713‑505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (1) For a section 713‑505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713‑535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: (a) an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group at a time (the leaving time); and (b) but for the cessation of membership and section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision. Sections 716‑340 and 716‑345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. <table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:345.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Extended operation of sections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 1</span><br><span style="font-weight:bold">Sections</span><span style="font-weight:bold"> </span><span style="font-weight:bold">716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">340 and 716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">345 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> operate in relation to:</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 2</span><br><span style="font-weight:bold">In the same way as they operate in relation to:</span></p></td></tr></thead><tbody><tr><td style="width:5.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:161.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>46</span><span>‑</span><span>90 of that Act</span></p></td><td style="width:156.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>40</span><span>‑</span><span>455 of that Act</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software pool created under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure allocated to a software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Software, expenditure on which was in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>In</span><span>‑</span><span>house software, expenditure on the development of which is allocated to a software development pool</span></p></td></tr></tbody></table> ``` (1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: Section 703‑30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004. (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time) a wholly‑owned subsidiary of the entity that became the head company of the group (the head entity), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier‑1 company of the group at the formation time. Despite the amendment of section 719‑30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) Section 719‑160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719‑160(3) of the Income Tax Assessment Act 1997. (3) However, that effect of section 719‑160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division. (2) Paragraphs 701‑1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier‑1 company at the time the MEC group came into existence. (a) the entity and one or more other entities were members of a potential MEC group as eligible tier‑1 companies, throughout the period: (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier‑1 company, at the time the transitional group came into existence. To avoid doubt, sections 707‑325 and 707‑327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719‑305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707‑A of that Act. Subsection 719‑325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006. (1) A reference in an agreement to item 25 of the table in subsection 721‑10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: (1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: Division 725 applies to a scheme entered into on or after 1 July 2002. It also applies to a scheme entered into on or after 27 June 2002, but only if: ### Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (1) Division 727, as inserted by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 and amended by the New Business Tax System (Consolidation and Other Measures) Act 2003, applies to a scheme entered into on or after 1 July 2002. (b) a presumed indirect value shift that happens under the scheme and affects a realisation event that happens on or after 1 July 2002. (a) the economic benefits taken into account in determining that the scheme has resulted in that indirect value shift or presumed indirect value shift include economic benefits provided by: > Note: In that case, the consequences of the trigger event are worked out under Division 138 or 139 of the Income Tax Assessment Act 1997: see items 13 and 14 of Schedule 15 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002. (1) An indirect value shift does not have consequences under Division 727 of the Income Tax Assessment Act 1997 if, to the extent of at least 95% of their total market value, the greater benefits consist entirely of: (a) a right to have services that are covered by section 727‑240 of that Act provided directly by the losing entity to the gaining entity; or (d) if the losing entity’s 2002‑2003 income year ends before 30 June 2003—the start of the losing entity’s 2004‑2005 income year. (2) For the purposes of section 727‑850 (about a presumed indirect value shift affecting a realisation event) of the Income Tax Assessment Act 1997, subsection (1) of this section applies to the presumed indirect value shift: #### 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (2) Paragraph 727‑470(2)(a) of the Income Tax Assessment Act 1997 (as in force immediately before the commencement of this section) continues to have effect in relation to the indirect value shift as if the repeals and amendments made by Schedule 1, Parts 1 and 2 of Schedule 3 and Schedule 8 to the Tax Laws Amendment (Small Business) Act 2007 had not been made. ## Division 235 Particular financial transactions ## Subdivision 235 ‑I—Instalment trusts ## 235‑810 Application of Subdivision 235‑I 235‑810 Application of Subdivision 235‑I of the Income Tax Assessment Act 1997 Subdivision 235‑I of the Income Tax Assessment Act 1997 applies to assets acquired by the trustee of an instalment trust in: ## Division 242 Leases of luxury cars ## 242‑10 Application 242‑10 Application (1) Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years. (2) However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time). (3) The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997. ## 242‑20 Balancing adjustments 242‑20 Balancing adjustments Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997. ## Division 245 Forgiveness of commercial debts ## Subdivision 245 ‑A—Application of Division 245 of the Income Tax Assessment Act 1997 ## 245‑5 Application and saving 245‑5 Application and saving (2) Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in: ## 245‑10 Pre‑28 June 1996 arrangements etc 245‑10 Pre‑28 June 1996 arrangements etc. (1) Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that: (b) is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose. (a) if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or ## Division 247 Capital protected borrowings ## Subdivision 247 ‑A—Interim apportionment methodology ## 247‑5 Interim apportionment methodology 247‑5 Interim apportionment methodology The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007. > Note: To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997. ## 247‑10 Products listed on the Australian 247‑10 Products listed on the Australian Stock Exchange that have explicit put options (b) contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option; the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option. (3) For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5). (4) If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is: (a) the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less (b) the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest. (5) If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is: (6) If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil. ## 247‑15 Other capital protected products 247‑15 Other capital protected products (1) If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one. (2) If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred. ## 247‑20 The indicator method 247‑20 The indicator method (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year. (3) If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year. (a) for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and (b) for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into. ## 247‑25 The percentage method 247‑25 The percentage method (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year: ## Subdivision 247 ‑B—Other transitional provisions ## 247‑75 Post‑July 2007 capital protected 247‑75 Post‑July 2007 capital protected borrowings Step 1. Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. Step 2. Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3). Step 3. If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year. > Note: Example: Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. ## 247‑80 Capital protected borrowings in e 247‑80 Capital protected borrowings in existence on 1 July 2013 (1) This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75): (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. ## 247‑85 Extensions and other changes 247‑85 Extensions and other changes (1) This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred: (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times: (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate. ## Division 253 Financial claims scheme for account‑holders with insolvent ADIs ## Subdivision 253 ‑A—Tax treatment of entitlements under financial claims scheme ## 253‑5 Application of section 253‑5 of th 253‑5 Application of section 253‑5 of the Income Tax Assessment Act 1997 Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008. ## 253‑10 Application of sections 253‑10 an 253‑10 Application of sections 253‑10 and 253‑15 of the Income Tax Assessment Act 1997 ## Part 3 ‑25—Particular kinds of trusts (a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and (2) Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001 (the new Act) applies to the plant on this basis: (a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant’s opening adjustable value; and (b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and (c) if you excluded an amount from your assessable income under section 42‑290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999—the cost of the plant, and its opening adjustable value, are reduced by that amount; and (d) if subparagraph (1)(b)(ii) applies to you—you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi‑owner of the plant under the former Act continue. (3) If you were using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis: (a) for the diminishing value method—replace the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate you were using; and (i) replace the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate you were using; and (ii) increase the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note 1: Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced. > Note 2: Small business entities can choose to work out the decline in value of their depreciating assets under Division 328. (a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or (3) If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40‑70(1) or 40‑75(1) of the new Act that includes the plant’s effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and (2) For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets. (3) For a case where the plant is merged into another depreciating asset, section 40‑125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it. (b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and (a) you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and (b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU’s opening adjustable value. (1) Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001. (2) For a unit of software for which you were deducting amounts under Subdivision 46‑B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis: (d) you must use the same effective life you were using under Subdivision 46‑B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001. (1) This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day. (b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and (c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and (1) This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001. > Note: Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8). (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330‑80 of the former Act for your income year ending on 30 June 2001; and (c) in applying the formula in section 40‑75 of the new Act for the income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The remaining effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these: (i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and (ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (7) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and (b) the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of expenditure incurred in carrying on eligible quarrying operations—the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (i) you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day) after 30 June 2001; or (ii) the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day) after 30 June 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which the start day occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year. there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (1) This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330‑H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and (c) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (i) any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset); (i) any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (4) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (4) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (b) the expenditure would have been transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330‑H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for your income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (1) Despite subsections 40‑35(5), 40‑38(5) and 40‑40(4), there is no additional decline in the value of the notional asset referred to in those subsections if: (a) apart from this section, subsection 40‑35(5), 40‑38(5) or 40‑40(4) would apply because the real asset referred to in that subsection is disposed of; and (a) at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373‑35 of the former Act; and (b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day. (a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and (1) Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time). (2) Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time. (a) you have deducted or can deduct an amount under Subdivision 387‑G of the former Act for an amount (the qualifying amount) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and (b) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and (1) This section applies to you if you have deducted or can deduct an amount under Subdivision 400‑A of the former Act for an amount (the qualifying amount) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400‑A of the former Act. (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and (c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400‑15(3) of the former Act; and (1) Units of plant that you had allocated to a pool under Subdivision 42‑L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act. (a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and (c) in applying the formula in section 40‑70 of the new Act for your income year in which 1 July 2001 occurs—it has a base value equal to that opening adjustable value; and (d) you replace the component in the formula in subsection 40‑70(1) of the new Act that includes an asset’s effective life with the pool percentage you were using for the pool; and (e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40‑115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and (f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset. (3) An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item). > Note 1: You work out the decline in value of an item removed under this subsection under Subdivision 40‑B of the new Act, using the cost for it worked out under section 40‑205 of the new Act. (b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset. (2) The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year) in this way: (a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and (b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section. (a) for a unit of plant (including IRUs and expenditure on software that is not pooled)—its undeducted cost at the end of 30 June 2001; or (b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence—the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or (c) for transport capital expenditure—the entity’s amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or (d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (e) for expenditure on evaluating the impact on the environment of a project—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (f) for assets that were pooled under Subdivision 42‑M or 42‑L of the former Act—the closing balance of the pool at the end of 30 June 2001. (4) The asset’s base value for applying the formula in section 40‑70 of the new Act for the diminishing value method is that opening adjustable value. (5) The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an item of plant for which you were using the prime cost method—using the rules in section 40‑10 of this Act; and (c) for a unit of software for which the entity was deducting amounts under Subdivision 46‑B of the former Act—using the rules in subsection 40‑25(2) of this Act; and (f) for an amount of expenditure on evaluating the impact on the environment of a project—using the rules in section 40‑55 of this Act. (6) The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an amount of unrecouped expenditure under Division 330 of the former Act—using the rules in section 40‑35 of this Act; and (b) for an amount of transport capital expenditure under Division 330 of the former Act—using the rules in section 40‑40 of this Act; and (7) The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act. (a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑C of the former Act; or (b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑H of the former Act; or (c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387‑B of the former Act; or (d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; or (e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365. (9) The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001. (10) You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount). (11) You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount. (1) Subsections 40‑65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened: (b) you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act. (a) paragraph 40‑65(6)(a) of the Income Tax Assessment Act 1997 included both events set out in subsection (1) of this section; and (b) subsections 40‑65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events. (1) A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936. (2) An amount you have deducted or can deduct for a water facility under Subdivision 387‑B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40‑F of the new Act. (3) A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936. (a) you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40‑115 (about splitting a depreciating asset) or 40‑125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and (b) it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40‑72 of that Act; (2) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if: (c) it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40‑72 of that Act. (3) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset) before 10 May 2006 if: (b) the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and (d) it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40‑72 of that Act. (a) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you: (b) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001. (2) If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act. (3) Otherwise, Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section. (a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or (b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or (ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life. (1) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001. > Note: If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40\. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997. (1A) Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001. (1B) Subsection (1) applies to a mining, quarrying or prospecting right (the new right) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if: (i) the other company is a member of the same wholly‑owned group as the original holder and was a member of that group just before that day; and (ii) the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer. (1D) Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if: (b) the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001. (a) you acquired, under an interest realignment arrangement, an interest (a new interest) in a mining, quarrying or prospecting right; and (b) the interest was acquired in exchange for one or more other interests (old interests) in other mining, quarrying or prospecting rights; and Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001. (a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or (b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership; the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act. (3) An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that: (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act. (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act. (6) Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243. (7) An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if: (a) you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and (8) The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section. (c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act. (2) Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001. A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act. if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011. (2) The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011. (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset for an income year is the amount worked out under section 40‑130 if: (a) the income year is the year in which you start to use the asset, or have it installed ready for use, for a taxable purpose; and (b) subsection (2) (about businesses with turnover less than $500 million) applies to you for the year and for the income year in which you started to hold the asset (if that was an earlier year); and > Note 1: An effect of paragraph (1)(a) is that this Subdivision only applies to one income year per asset. See also subsection 40‑135(1). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $500 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. Exception—assets for which the decline in value is worked out under section 40‑82 or Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (3) However, this section does not apply to a depreciating asset for an income year if you work out the decline in value of the asset for the income year under any of the following: (1) For the purposes of paragraph 40‑120(1)(c) and section 328‑182, you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you: > Note: Section 328‑182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997. (i) entering into a contract under which you hold the post‑12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑12 March 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post‑12 March 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (8) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (9) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (10) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (1) For the purposes of section 40‑120, the decline in value for the income year in which paragraph 40‑120(1)(a) is satisfied (the current year) is: > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 12 March 2020 to 30 June 2020 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2020 to 30 June 2021. (a) 50% of the asset’s cost as at the end of the current year, disregarding any amount included in the second element of the asset’s cost after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997, assuming its cost were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (3) However, the amount worked out under subsection (2) for an income year cannot be more than the amount that is the asset’s cost for the year. (a) 50% of the sum of the asset’s opening adjustable value for the current year and any amount included in the second element of its cost for that year, disregarding any amount included in that second element after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997 assuming: (ii) for the prime cost method—the component “Asset’s \*cost” in the formula in subsection 40‑75(1) of that Act (as adjusted under that section) were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (b) for the prime cost method—the sum of its opening adjustable value for the income year and any amount included in the second element of its cost for that year. (1) The decline in value of a depreciating asset is not worked out under this Subdivision for an income year if this Subdivision already applied in working out the decline in value of the asset for an income year. (2) For an income year later than the year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (3) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (4) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) You may choose that the decline in value of a particular depreciating asset for an income year, and subsequent income years, is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the first income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. If this Subdivision applies to work out the decline in value of a depreciating asset you hold for an income year, no other provision of this Act or the Income Tax Assessment Act 1997 applies to work out that decline in value. (1) For the purposes of this Subdivision, you are covered by this section for a depreciating asset if, on or before 30 June 2023: (2) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (3) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or Exception—assets for which the decline in value is worked out under Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (a) the asset is allocated to a low‑value pool, or expenditure on the asset is allocated to a software development pool (see Subdivision 40‑E of the Income Tax Assessment Act 1997); or (b) you or another taxpayer has deducted or can deduct amounts for the asset under Subdivision 40‑F of the Income Tax Assessment Act 1997 (about primary production depreciating assets). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $5 billion; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this section. (ii) if the 2019‑20 income year ends on or before 6 October 2020—the sum of your ordinary income (if any) and statutory income (if any) for the 2019‑20 income year; and (c) the sum of the amounts worked out under subsection (3) for the 2016‑17, 2017‑18 and 2018‑19 income years exceeds $100 million. (b) next, work out the cost of each of those assets (including any amounts included in the second element of the asset’s cost at a time that is in the income year); (4) For the purposes of subsection (3), disregard an asset if, at the time you first used the asset, or had it installed ready for use, for a taxable purpose: (a) it was not reasonable to conclude that you would use the asset principally in Australia for the principal purpose of carrying on a business; or (5) For the purposes of paragraph (3)(b), to work out the cost of a depreciating asset that is capital works (see section 43‑20 of the Income Tax Assessment Act 1997): (a) disregard section 40‑45 of that Act and work out the cost of the capital works using Subdivision 40‑C of that Act; and (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under subsection (3) if: (a) where section 40‑155 covers you for the current year (regardless whether section 40‑157 also covers you for the current year)—an exclusion applies to you and the asset for the current year under section 40‑165 (about exclusions for businesses with turnover of $50 million or more); or (ii) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s start time occurs in the current year—the asset’s cost as at the end of the current year, disregarding any amount included in the asset’s cost after 30 June 2023; or (b) if the asset’s start time occurred in an earlier year—the sum of its opening adjustable value for the current year and any amount included in the second element of its cost for the current year, disregarding any amount included in the asset’s cost after 30 June 2023. > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 6 October 2020 to 30 June 2021 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2021 to 30 June 2022. (a) where paragraph 40‑160(2)(a) applies—section 40‑155 would not cover you for the income year if the reference in that section to $5 billion were instead a reference to $50 million; and (i) entering into a contract under which you hold the post‑6 October 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑6 October 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of satisfying paragraph 40‑160(1)(a) for the post‑6 October 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you already satisfied paragraph 40‑160(1)(a) of this Act for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (9) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (1) For the purposes of subsections 40‑160(2) and 40‑170(1A), an exclusion applies to you and an asset for an income year if any of the exclusions in this section applies in relation to the asset. (4) This exclusion applies in relation to the asset if the asset is available for use, at any time in the income year, by any of the following: (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under this section if: (ii) you started to use the asset, or have it installed ready for use, for a taxable purpose in an earlier income year; and (b) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under section 40‑82 of the Income Tax Assessment Act 1997—the amount worked out under subsection (3); or (b) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under Subdivision 40‑BA of this Act—the amount worked out under subsection (4); or Assets affected by section 40‑82 of the Income Tax Assessment Act 1997 (about assets costing less than $150,000, medium sized businesses) (a) the amount that would be the asset’s decline in value for the year under section 40‑82 of the Income Tax Assessment Act 1997, assuming the reference in subparagraph 40‑82(3A)(b)(ii) of that Act to 31 December 2020 were instead a reference to the 2020 budget time; and (a) the amount that would be worked out under paragraph 40‑130(2)(a) or (4)(a) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(a) and (4)(a) to 30 June 2021 were instead references to the 2020 budget time; and (c) the amount that would be worked out under paragraph 40‑130(2)(b) or (4)(b) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(b) and (4)(b) to “the amount worked out under paragraph (a)” were instead references to “the amounts worked out under paragraphs 40‑170(4)(a) and (b)”. (a) the amount that would be the asset’s decline in value for the year under Division 40 of the Income Tax Assessment Act 1997, disregarding any amounts included in the eligible second element worked out under section 40‑175 of this Act for the asset for the year; and The amount worked out under this section (the eligible second element) for a depreciating asset for an income year is the sum of any amounts included in the second element of the asset’s cost at a time that is in both of the following periods: (1) For an income year later than a year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (2) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (3) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) This section applies if the decline in value for a depreciating asset for an income year is worked out under this Subdivision, and at a time (the balancing adjustment time) in a later income year: (i) it becomes not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (b) none of the requirements in paragraphs 40‑295(1)(a), (b) or (c) of the Income Tax Assessment Act 1997 are satisfied in relation to the asset. (2) For the purposes of Subdivision 40‑D of the Income Tax Assessment Act 1997 assume that, at the balancing adjustment time, you stop using the asset, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again. (3) For the purposes of section 40‑180 of the Income Tax Assessment Act 1997 assume that the reference in item 3 of the table in subsection 40‑180(2) of that Act to “because you stop using it for any purpose expecting never to use it again” were instead a reference to “because of section 40‑185 of the Income Tax (Transitional Provisions) Act 1997”. (4) If a balancing adjustment event happens to a depreciating asset you hold because of this section, this Subdivision cannot apply to work out the decline in value of the asset for a later income year. (1) You may choose that the decline in value of a particular depreciating asset for an income year is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year. (1) Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40. (a) you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset: (ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and (4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day. (5) The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if: (i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or (ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and  > sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose. (7) Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens: (a) if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b). (i) an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and (ii) the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and (3) The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount. (a) on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and (c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and (ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal; (2) There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal. (3) Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount. If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997. (a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and (b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and: (i) the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, the R&D entity is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—a clawback amount under section 355‑447 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑466 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. (b) section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions. > Note 2: The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and: (i) the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset; (ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, an R&D entity (the partner) that is a partner in the R&D partnership and is entitled to one or more new law deductions for one or more income years for the asset, is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—a clawback amount under section 355‑449 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑468 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s new law deductions mentioned in paragraph (2)(b) of this section. (4) Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event. > Note: Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions. (1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant. (b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and (3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it. (a) there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and (b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act. (2) The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor. (3) The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and <table cellspacing="0" cellpadding="0" style="width:364.2pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:353.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading" style="page-break-inside:avoid"><span>Conditions for small business taxpayers retaining accelerated rates</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Condition</span></p></td></tr></thead><tbody><tr><td style="width:21.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:321.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>The transferee must have been a small business taxpayer for the income year (the </span><span style="font-weight:bold; font-style:italic">start year</span><span>) that includes the time when the entity first used the plant, or first had it installed ready for use.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>2</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>At that time, neither of these applies:</span></p><p class="Tablea"><span>(a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;</span></p><p class="Tablea"><span>(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection</span><span> </span><span>(5).</span></p></td></tr></tbody></table> ``` (4) For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership. (5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement. (a) for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or (i) replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and (ii) increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).  (b) if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11). (c) that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and (d) that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and (e) that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity. (a) for taxable supplies (if any) the entity makes during the year in the course of carrying on a business—the value (as defined by section 9‑75 of the GST Act) of the supplies; and (b) for other supplies the entity makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies. (1) The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for: (a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (c) for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or (d) for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant. (3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115. (4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain. (5) Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee. (i) the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or (a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and (1) A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act. (2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year. For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if: Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act. (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset): and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply. (i) for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or (ii) for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and (c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act. (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and (2) Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act. The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under: (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on: (2) You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act. (3) A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under: (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and (2) Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act. A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act. The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001. If: (d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act; (a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and (a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and (b) the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and (c) paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997. Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years. (1) For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section. (b) the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (b) that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (1) There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea" style="page-break-after:avoid"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a); and</span></p><p class="Tablea" style="page-break-after:avoid"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (b) disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (f) an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division. (4) If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45‑5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest. (5) If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45‑10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest. Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Disregard the use of the following amounts in determining (for the purposes of Subdivision 50‑A of the Income Tax Assessment Act 1997 whether a fund established before 1 July 1997 operates and pursues its purposes in Australia: Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years. (2) However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date. Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if: (b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time. Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years. 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years (1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act. <table cellspacing="0" cellpadding="0" style="margin-left:56.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:258.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Application provisions for specific sections</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-size:9pt; font-weight:bold">Item</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">This section of the </span><span style="font-size:9pt; font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-size:9pt; font-weight:bold"> ...</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">Applies as described in this provision of this Act ...</span></p></td></tr></thead><tbody><tr><td style="width:24.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55(1)</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>95</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>8</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td></tr></tbody></table> ``` (a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and (b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997. > Note: Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year. (b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997; sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997). > Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock. (3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997. (a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and (b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936; > Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal. #### 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997. (1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year. (2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936. (3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year: (a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners; (b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed. > Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year. > Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year. (b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year; the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year. (2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. (3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2). #### 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997. #### 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business (1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. (2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity. > Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997. (1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. (2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value. > Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997. #### 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year. (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. > Note: Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. > Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given). (5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act). (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment. > Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%. (5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%. (6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.  > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section. (b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4). Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age. Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later. Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies. Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3. (4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997. (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%. > Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986. (5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D. > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. (a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and (b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year). (3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and (2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual: (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income. > Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F. > Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997. > Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997. #### 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 (1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012. (2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies. (3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act. (b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009. (2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if: (i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest; (iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or (i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest; (iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009. (2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time. (4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2): (a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and (b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being: (ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and (c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and (d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if: (i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or (ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and (e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and (i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and (ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and (g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest. (a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced: (i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or (ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and (b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5. (2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right. (3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right. (2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. (3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section. Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years. (1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision. > Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision). > Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936). > Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997. (a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936. (1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936. (2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997. > Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997. (3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and (d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; (f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time. > Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and (d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015. (a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or (4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if: (b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset. The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year. (a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and (1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied: (b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and (d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works). (3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936. Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936. (b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006. (2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement. > Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement. Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual: (b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her. 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act (1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee). (2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year: (3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection. #### 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997. Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936). (2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if: (a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; (a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011); (b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986. > Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section. If: (a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and (b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936; Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995. (1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997. (2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997. (3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997. (4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997. > Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one. Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year: (a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and (b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year; the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation. Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset. (b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section); > Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply. (1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if: (a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and (2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value. (4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value. (a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997. (2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less. (1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936: (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. (1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if: (2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by: (a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or (a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or (2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period. Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year: If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997. (1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002. (2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset. (3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required. (i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and (ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and (c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and (f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997). (a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or (1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:  > total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part. (a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or (2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section. (3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1). (1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences. > Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997. (c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets). (4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act. (5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act. Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement. (a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and (2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time. (a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and (ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs. (2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer. (a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and (b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest; (2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event. (3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly. (4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly. <table cellspacing="0" cellpadding="0" style="width:362.55pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:351.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Creating a CGT asset</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">CGT event number</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Applicable amount</span></p></td></tr></thead><tbody><tr><td style="width:50.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D1</span></p></td><td style="width:290.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the incidental costs the originating company incurred that relate to the CGT event</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D2</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the option</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D3</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the right</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>F1</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred on the grant, renewal or extension of the lease</span></p></td></tr></tbody></table> ``` (5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day. A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision. (a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996. (b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. (b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend. (3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities. (1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company. (2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred. (3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company. (1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of: (2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of: (3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note. (1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised. (b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and (ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act. You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and (b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996. (c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and (c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over. (3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. (a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and (c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and (d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act. (3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division. Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years. A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: (1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day. (2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice. (a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and (b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and (a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and (b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and (c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group. (5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004. (6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection. (1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss): (b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions); and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time: (i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or (e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and (f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and (ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred; (2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if: (a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these: (i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset; (ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and (3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act. (a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and (b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section. (5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of: (a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and (b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset. Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. (ii) that could have been deducted, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the deduction had not been limited by the company’s income for that income year; and (ii) that could have been applied, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the application of the loss had not been limited by the company’s capital gains for that income year. 170‑C Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred #### 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years. #### 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). #### Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997. Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997. If: (a) all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (d) that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and (e) the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place. Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years. > introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament. Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day. #### Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting #### 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B. (1) The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day. (2) No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted. #### 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting (1) Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if: (a) the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and (b) none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount. (2) No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount. (1) This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account. (2) For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. > Note 2: If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60. (3) For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)). (4) For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. (5) The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if: (a) during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and (b) the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section. (a) the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and (b) during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components. (7) For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. (8) Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it: (b) the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component. (9) Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component. (10) For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002: (b) lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination; (c) a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination); (e) the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination); (f) the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination). Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period: 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows: (a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and (i) in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and (ii) in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. > Note: A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002. #### 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002: (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:23.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:87.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A franking surplus</span></p></td><td style="width:220.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.009.png" width="175" height="58" alt="Start formula Amount of the class A franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.010.png" width="190" height="56" alt="Start formula Amount of the class B franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.011.png" width="190" height="56" alt="Start formula Amount of the class C franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` #### 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus): (a) a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Original surplus</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:85.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>class A</span></p></td><td style="width:220.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.012.png" width="169" height="38" alt="Start formula Amount of the original class A surplus times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.013.png" width="169" height="38" alt="Start formula Amount of the original class B surplus times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.014.png" width="169" height="38" alt="Start formula Amount of the original class C surplus times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (4) If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit): (a) a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company. (5) The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking deficit into 1997 Act franking debit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Original deficit</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking debit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(4)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:70.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A</span></p></td><td style="width:235.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.015.png" width="164" height="38" alt="Start formula Amount of the original class A deficit times start fraction 39 over 61 end fraction end formula "></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.016.png" width="164" height="38" alt="Start formula Amount of the original class B deficit times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.017.png" width="164" height="38" alt="Start formula Amount of the original class C deficit times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (2) A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if: (c) the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions. (3) The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if: (b) the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and (1) While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit. (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year. (3) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: > Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act. (1) The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account. (a) a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time; (3) If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if: (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity. #### 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If: the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time. (1) Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections. (2) If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year. Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year. Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year. (5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in: that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement. (6) The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (7) The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (2) The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (3) The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (i) are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and (a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and (b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section. (a) whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and (1) This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002. (a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and (3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded. (1) This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002; (2) If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (3) If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (4) If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. (5) If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows: (a) any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and (i) in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and (ii) in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. #### 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF.  #### 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act). (2) If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus): (a) a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF. (4) If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit): (a) a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF. This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period). (1) The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period: (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (1) The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period. (2) The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner. (3) The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5. (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and (d) the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner; the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received. (3) A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time: (1) A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends. (2) However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period. (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (a) the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed: (d) the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and (e) the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return. (2) The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day. (1) The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period. (2) The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made. Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period. (b) on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax); the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed: (c) the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and (d) the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return. (2) The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day. The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period: If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day. If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and If: (a) a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and (b) the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment; In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment. If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment. The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with. If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953. (1) Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period. (a) the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and (b) the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3); the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on: (c) if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or If: Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax. Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division. If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997. (a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day: (3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002. (a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002: > Note: As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date. (b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997. In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003. (1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year. (a) a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of: (i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time; (iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period; (2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if: (b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time: (ii) the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. > Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. > Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. (7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table: <table cellspacing="0" cellpadding="0" style="width:365.35pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount of the franking credit and the exempting debit</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">If:</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the credit and debit is:</span></p></td></tr></thead><tbody><tr><td style="width:22.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The period starts immediately after 7.30</span><span> </span><span>pm by legal time in the Australian Capital Territory on 13</span><span> </span><span>May 1997</span></p></td><td style="width:141.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Both these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was not in surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>All these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was in surplus at the start of the period;</span></p><p class="Tablea"><span>(c) the surplus in the account at the switch time is greater than the surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the franking surplus in the Australian company’s franking account at the switch time; and</span></p><p class="Tablea"><span>(b) the franking surplus in the Australian company’s franking account at the start of the period</span></p></td></tr></tbody></table> ``` (a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and (b) the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period. Subdivision 235‑I of the Income Tax Assessment Act 1997 applies to assets acquired by the trustee of an instalment trust in: (1) Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years. (2) However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time). (3) The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997. Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997. (2) Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in: (1) Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that: (b) is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose. (a) if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007. > Note: To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997. (b) contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option; the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option. (3) For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5). (4) If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is: (a) the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less (b) the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest. (5) If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is: (6) If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil. (1) If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one. (2) If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year. (3) If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year. (a) for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and (b) for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year: Step 1. Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. Step 2. Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3). Step 3. If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year. > Note: Example: Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75): (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred: (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times: (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate. Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008. (a) the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and (b) the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities: (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (i) the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or (ii) the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and (f) none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made: (i) Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event; (ii) a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year. (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (b) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (c) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year #### 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year (a) the requirements set out in paragraphs 275‑610(1)(a), (b) and (c) of the Income Tax Assessment Act 1997 are satisfied in respect of an amount of non‑arm’s length income of a managed investment trust in relation to an income year; and (b) the managed investment trust became a party to the scheme mentioned in paragraph 275‑610(1)(a) of that Act before the day on which the Bill that became the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 was introduced into the House of Representatives; and Division 276 of the Income Tax Assessment Act 1997 as inserted in that Act by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (the amending Act) applies as set out in subitem 1(1) of Schedule 8 to the amending Act. (b) if the trustee of the trust has made a choice for the purposes of paragraph 1(1)(b) of Schedule 8 to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016—the first income year starting on or after 1 July 2015; or (c) if the trustee of the trust has made a choice for the purposes of subparagraph 276‑10(1)(e)(i) of the Income Tax Assessment Act 1997 in respect of the 2016‑17 income year—that income year. (c) the trust is an AMIT for an income year (the discovery year) that is the starting income year or a later income year. (1) This section applies if the trust has an under or over of a character in the discovery year relating to the base year. (b) if, at a time, the trust sent its members distribution statements for an income year that is prior to the starting income year—assume that the trust sent those members AMMA statements for that income year at that time. (3) For the purposes of Division 276 of the Income Tax Assessment Act 1997, treat the under or over mentioned in subsection (1) as an under or over of the AMIT, in the discovery year relating to the base year, of the character mentioned in that subsection. (a) had the under or over mentioned in subsection (1) been discovered before the starting income year, this Act would have operated to produce a particular effect (the pre‑AMIT scheme effect) for the base year in relation to the amount or amounts reflected in the under or over; and 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT #### 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT (b) working out the amount (if any) of the entity’s capital gain under subsection 104‑70(4) of the Income Tax Assessment Act 1997. (3) For the purpose of working out the amount of the non‑assessable part mentioned in paragraph 104‑70(1)(b), treat the following provisions as being in operation at the time the payment was made: (b) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in paragraph (a). (4) Subsection (3) does not apply to the extent (if any) that the entity, in the income tax return that it lodged for the income year in which the payment was made, included the amount of the payment in its assessable income for that income year. (5) For the purposes of section 118‑20 of the Income Tax Assessment Act 1997, treat this section as being in Part 3‑1 of that Act. (2) The Commissioner cannot amend the entity’s assessment for the income year in which the payment was made in a particular way if: (b) the Commissioner could not amend the assessment in that way if the following provisions were in operation at the time the payment was made: (ii) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in subparagraph (i); and Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82‑10F). (2) The object of this section is to apply (with modifications) provisions limiting deductibility in respect of certain contributions made during the period that: (a) Subdivisions AA and AB of Division 3 of Part III of the Income Tax Assessment Act 1936, as in force just before they were repealed by the Superannuation Legislation Amendment (Simplification) Act 2007; (b) any other provision of the Income Tax Assessment Act 1936, or of any instrument made under that Act, to the extent that it relates to the operation of those Subdivisions; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of those Subdivisions. (b) the deduction limit mentioned in section 82AAC for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (c) the deduction limit mentioned in section 82AAT for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (d) Division 290 of the Income Tax Assessment Act 1997 did not apply to contributions made during the income year mentioned in paragraph (a). (2) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of a defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection and subsection (4), the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 5 September 2006; (b) the defined benefit interest mentioned in paragraph (2)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 5 September 2006, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (2)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (4) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of the defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection, the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 12 May 2009; (b) the defined benefit interest mentioned in paragraph (4)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 12 May 2009, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (4)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (1) The object of this section is to apply (with modifications) provisions relating to excess non‑concessional contributions tax in respect of certain contributions made during the period that: (b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision. (ea) in a case where paragraph 292‑95(1)(b) of that Act would have allowed the contribution mentioned in that paragraph to be made at a time within that period—that paragraph allowed the contribution to be made on or before 30 June 2007; and (f) paragraph 292‑95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and (fa) in a case where subsection 292‑100(2), (4), (7) or (8) of that Act would have allowed the contribution mentioned in that subsection to be made at a time within that period—that subsection allowed the contribution to be made on or before 30 June 2007; and (g) paragraph 292‑100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and (h) contributions made during that period that are covered under section 292‑100 of that Act reduce the person’s CGT cap amount for the 2007‑2008 financial year in accordance with subsection 292‑105(2) of that Act (and despite subsection (1) of that section); and (i) if the conditions in subsection (4) are satisfied—the person’s excess non‑concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and (b) the Commissioner gives the person a transitional release authority under subsection 292‑80A(2) in response to the application; and (c) the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292‑80B within 21 days after the date of the release authority; and (d) the superannuation provider pays the person the amount required under section 292‑80C in relation to the transitional release authority. (b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act). (6) The amount to be included in the first person’s amount of non‑concessional contributions under subparagraph (3)(b)(ii) is the sum of: (a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and (b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made. (c) under Division 295 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)), the contribution is included in the assessable income of the superannuation provider in relation to the superannuation plan to which the contribution is made; and (8) For the purposes of paragraph (7)(b), treat the person as an employee of the other entity if the person would be treated as an employee of the other entity under Division 290 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)). (1) A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007. (2) The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292‑80(3)(b)(i), the person would have excess non‑concessional contributions for the financial year mentioned in paragraph 292‑80(3)(a). (4) For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out: The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 21 days after the date of the release authority. (1) A superannuation provider that has been given a transitional release authority in accordance with section 292‑80B must pay to the person within 30 days after receiving the release authority the least of the following amounts: (a) if the person requests the provider in writing to pay a specified amount in relation to the release authority—that amount; (c) the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person in complying superannuation plans. > Note 1: Section 288‑95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection. > Note 2: Section 288‑100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority. > Note 3: For reporting obligations on the superannuation provider in these circumstances, see section 390‑65 in Schedule 1 to the Taxation Administration Act 1953. (2) The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person in complying superannuation plans. (3) Section 307‑125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section. (a) your non‑concessional contributions cap for the 2015‑2016 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsection 292‑85(7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 applies after the commencement of this section as if: (d) subsection 292‑85(6) of that Act as so amended had been applied (taking into account paragraph (c) of this subsection) for the purposes of working out your non‑concessional contributions cap for the 2016‑2017 financial year. (2) For the purposes of working out your non‑concessional contributions caps for the 2017‑2018 financial year and the 2018‑2019 financial year, if: (a) your non‑concessional contributions cap for the 2016‑2017 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsections 292‑85(6) and (7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 apply after the commencement of this section as if the amount worked out under subsection 292‑85(5) of that Act as so amended were $380,000. (3) To avoid doubt, this section does not affect your non‑concessional contributions cap for any financial year that ended before 1 July 2017. The tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your non‑concessional contributions (see section 292‑90 of the Income Tax Assessment Act 1997) for the financial year. (2) Subject to section 294‑55, the amendments of Division 294 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Treasury Laws Amendment (2017 Measures No. 2) Act 2017 apply on and after 1 July 2017. Despite sections 294‑30 and 294‑140 of the Income Tax Assessment Act 1997 (which are about when you have excess transfer balance), you do not have excess transfer balance in your transfer balance account on any day in the period of 6 months beginning on 1 July 2017 if: (a) the only transfer balance credits in the account in that period arose under item 1 of the table in subsection 294‑25(1) of that Act (which is about superannuation income streams you have just before 1 July 2017); and (b) the sum of those transfer balance credits exceeds your transfer balance cap, but is less than or equal to $1,700,000; and (c) at the end of the period, the sum of all the transfer balance debits arising in your transfer balance account equals or exceeds the amount of the excess from paragraph (b). (1) Despite subsection 294‑10(2), a transfer balance credit arises under item 4 of the table in subsection 294‑25(1) of the Income Tax Assessment Act 1997 only in relation to a borrowing that arises under a contract entered into on or after 1 July 2017. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2017 is treated as if it arose under a contract entered into before 1 July 2017 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) on 1 July 2017, a transfer balance debit arose in your transfer balance account under item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997; and (b) the sum of all the transfer balance credits that arise in your transfer balance account under item 1 of the table in subsection 294‑25(1) of that Act exceeds the amount that would, apart from this section, be the amount of that debit. (2) Despite column 2 of item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997, the amount of the transfer balance debit is instead equal to the sum worked out under paragraph (1)(b) of this section. 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain > The object of this Subdivision is to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the following legislative changes: (a) the introduction of a transfer balance cap (as a result of Schedule 1 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016); (b) the exclusion of transition to retirement income streams (and similar income streams) from being superannuation income streams in the retirement phase (as a result of Schedule 8 to that Act). (a) starting on the start of the day on which the Bill that became the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 was introduced into the House of Representatives; and (a) at the start of the pre‑commencement period, a CGT asset of a fund is a segregated current pension asset of the fund; and (i) at a time (the cessation time) in the pre‑commencement period, the asset ceases to be a segregated current pension asset of the fund; or (ii) at the start of 1 July 2017 (also the cessation time), the asset ceases to be a segregated current pension asset of the fund because it supports a superannuation income stream covered by subsection 307‑80(3) of the Income Tax Assessment Act 1997; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (b) the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year is greater than nil; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and #### 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑115(3)(a), the fund makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the fund’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Subsection 295‑390(1) of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). > 2016‑17 non‑exempt proportion means 1 minus the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year. #### 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset (i) the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997 in respect of the trust for the 2016‑17 income year; (ii) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year; and (d) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and #### 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑125(3)(a), the trust makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the trust’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Section 295‑400 of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). (a) unless paragraph (b) applies—1 minus the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997; or (b) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage worked out by subtracting the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year from 100%. This Subdivision applies to an entity that is the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust. For the purposes of this Subdivision, an asset is a 30 June 1988 asset of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust if the entity owned it at the end of 30 June 1988. > Note: Section 295‑90 of the Income Tax Assessment Act 1997 treats these assets as having been acquired on 30 June 1988. (1) The first element of the cost base of each 30 June 1988 asset of the entity’s is the greater of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). (2) The first element of the reduced cost base of each 30 June 1988 asset of the entity’s is the lesser of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). the market value of the asset as at the end of 30 June 1988 is the average of the highest and lowest trade prices for identical assets recorded on 30 June 1988 in whichever of the following markets is applicable: (d) if, on that date, there was a State capital city market (other than the Sydney market) that recorded a higher volume of trading than the Sydney market in identical assets—that State capital city market; (2) For the purposes of this section, an asset is taken to have been listed on an Australian stock exchange on 30 June 1988 if, and only if, on that day the asset had the status of having been granted official quotation by a securities exchange within the meaning of the former Securities Industry Act 1980 or the law of a State or Territory corresponding to that former Act. (b) at any time during the period commencing at the time when the shares were acquired and ending at the end of 30 June 1988, the company paid an amount that was not a dividend to the entity in respect of the shares; (b) at any time during the period commencing at the time when the interest or unit was acquired and ending at the end of 30 June 1988, the trustee of the trust paid an amount to the entity in respect of the interest or unit, being: (i) in a case where the entity was exempt from tax for the year of income in which the payment was made—an amount that, if the entity had not been exempt from tax, would not have been the entity’s assessable income; or the cost base to the entity of the interest or unit as at 30 June 1988 is reduced by so much of the amount as is not attributable to a deduction allowed under former Division 10C or 10D of the Income Tax Assessment Act 1936. (1) Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (2) and (3) of this section apply if an entity exercises rights or options as mentioned in that section to acquire: (b) the greater of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (b) the lesser of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (4) The payment referred to in subsection (2) or (3) can include giving property. To the extent that the payment does, use the market value of the property in working out the amount of the payment. (1) A notice given under subsection 82AAT(1A) or (1CB) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑170 of the Income Tax Assessment Act 1997. (2) A notice given under subsection 82AAT(1C) or (1CD) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑180 of the Income Tax Assessment Act 1997. (1) A proportion of the ordinary income and statutory income of a continuously complying fixed interest ADF of an income year that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).  > Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the income year. > Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the income year. (4) A choice for the purposes of the definition of reckoning time in subsection (5) must be made on or before the date of lodgment of the income tax return of the ADF for the income year to which the choice relates, or before a later day allowed by the Commissioner. > continuously complying fixed interest ADF, in relation to an income year (the current year), means a fund that is a fixed interest complying ADF in relation to each of the following years: > current 25 May balance, in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time: (b) subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 September 1989 is to be added to the balance; (b) a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that day, made a deposit with the ADF that consisted wholly or partly of the roll‑over (as defined in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 as in force on that day) of an eligible termination payment as so defined, being an eligible termination payment that included a concessional component (as so defined). > fixed interest complying ADF, in relation to a year of income, means a complying ADF where both of the following conditions are satisfied: (a) not less than 90% of the amount that, apart from this section, would be the assessable income of the ADF of the income year (other than non‑arm’s length income or amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997) consists of any one or more of the following: (ii) any profit arising on the disposal, redemption, cancellation or maturity of a CGT asset referred to in paragraph 295‑85(3)(b) of the Income Tax Assessment Act 1997; (iii) an amount included in assessable income under Division 16E of Part III of the Income Tax Assessment Act 1936 (or would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply); (ii) virtual PST life insurance policies (as defined in the Income Tax Assessment Act 1997) issued by a life insurance company. > original 25 May balance, in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988. > reckoning time, in relation to an ADF in relation to an income year, means the beginning of the income year, or such other time during the income year as the ADF chooses in accordance with subsection (4). (6) This section does not apply to an ADF in relation to an income year unless the whole of the benefit that would accrue to the ADF from the application of this section in relation to the income year has been, or can reasonably expected to be, passed on to eligible depositors. An election made by the trustee of a complying superannuation fund under subsection 279(4) of the Income Tax Assessment Act 1936 that had effect for the income year of the fund in which 30 June 2007 occurs continues to have effect as if it had been made under section 295‑465 of the Income Tax Assessment Act 1997. Subdivisions 295‑I (no‑TFN contributions) and 295‑J (Tax offset for no‑TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006‑2007 income year ends on a day (the end day) after 1 July 2007 as if: (b) the entity’s no‑TFN contributions income for the entity’s 2007‑2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007‑2008 income year if the contributions concerned had been made in the entity’s 2007‑2008 income year. (2) Division 301 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section because you are a member of the fund in the same way as it would apply if the payments were superannuation member benefits paid to you from a complying superannuation fund. For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. Subdivision 301‑F of the Income Tax Assessment Act 1997 applies in relation to income years starting on or after 1 July 2007. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to the following in respect of an income year that starts on or before 1 July 2021: (b) the amendments of the Income Tax Assessment (1997 Act) Regulations 2021 made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023. (a) a superannuation benefit (the trigger benefit) was paid to a person in the 2020‑21 income year or an earlier income year; and (c) the trigger benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; and (2) The Commissioner cannot amend an assessment on the basis that a superannuation benefit paid to the person is a superannuation income stream benefit because of the amendments made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 if: (iii) the superannuation benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (a) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (b) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. (1) The Minister may, by legislative instrument, make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions) that: (a) relate to the amendments or repeals made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023; and (2) Without limiting subsection (1), rules made under this section before the end of the period of 12 months starting on the day that Schedule commences may provide that provisions of that Schedule, or any other Act or instrument, have effect with any modifications prescribed by the rules. Those provisions then have effect as if they were so modified. (2) Division 302 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section after another person’s death, because the other person was a member of that fund, in the same way as it would apply if the payments were superannuation death benefits paid to you from a complying superannuation fund. For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if: (b) just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. (2) For the purposes of Subdivision 82‑B of Division 82, Division 302 and section 303‑5 of the Income Tax Assessment Act 1997, the definition of death benefits dependant in section 302‑195 of that Act applies as if paragraphs (a) and (b) of the definition were replaced with the following paragraphs: (a) a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008 or a person who was formerly such a spouse; or (b) a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008, who is aged less than 18. (ii) a superannuation guarantee payment, a small superannuation account payment, an unclaimed money payment, a superannuation co‑contribution benefit payment or a superannuation annuity payment. (2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you at a time in the period: (i) a condition of release specified in item 107A or 207AA of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; or (ii) a condition of release specified in item 109AA of the table in Schedule 2 to the Retirement Savings Accounts Regulations 1997. (1) This section applies to a superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with section 292‑80B. (2) The superannuation benefit is not assessable income and is not exempt income to the extent that it does not exceed the amount mentioned in subsection (3). (3) The amount is the amount of excess non‑concessional contributions stated in the release authority in accordance with paragraph 292‑80A(3)(a), reduced (but not below zero) by the amount of any superannuation benefit that was not assessable income and not exempt income under a previous operation of subsection (2) in relation to the release authority. (4) The superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3). (a) you have an interest in a FIF (within the meaning of Part XI of the Income Tax Assessment Act 1936, as in force just before the commencement of item 37 of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010) (the paying fund); and (b) Subdivision 305‑B of the Income Tax Assessment Act 1997 applies in relation to the paying fund (see section 305‑55 of that Act); and (c) the paying fund transfers an amount to a complying superannuation fund in respect of you during the deduction year; and (d) you choose under section 305‑80 of the Income Tax Assessment Act 1997 that the amount, or part of the amount, is to be treated as assessable income of the complying superannuation fund; and (e) immediately before the transfer happens, there is a post‑FIF abolition surplus (within the meaning of the Income Tax Assessment Act 1936) for the paying fund in relation to you; and For the purposes of the definition of specified roll‑over amount in the Income Tax Assessment Act 1997, treat the taxable component of a directed termination payment (within the meaning of section 82‑10F) as the element untaxed in the fund of a superannuation benefit that is a roll‑over superannuation benefit. (1) This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007. > Note: This section also applies to an income stream replacing an earlier one because of an involuntary roll‑over (see section 307‑127). (2) Despite subsection 307‑125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows: (a) first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007); (b) next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits. The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit. (3) Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened: (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day; (ba) the holder of the superannuation interest is aged 60 or above on 1 July 2007, if none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day. (a) treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and (b) work out the tax free component of the superannuation interest for the purposes of section 307‑125 of the Income Tax Assessment Act 1997 under subsections (6) and (6A). (i) an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and (ii) the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time; (b) next, work out the unused undeducted purchase price (within the meaning of paragraph (a) of the definition of that term in subsection 27A(1) of the Income Tax Assessment Act 1936 just before the commencement of this section, and disregarding paragraphs (b) and (c) of that definition) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007; (c) next, work out the pre‑July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this section) of the eligible termination payment. (a) at least one superannuation income stream benefit was paid from the superannuation income stream before 1 July 1994; or (b) section 27AAAA of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007) applied to the superannuation income stream just before 1 July 2007; (7) For the purposes of paragraph (6)(c), disregard the value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment. (8) If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as: (b) if 1 or more other events mentioned in subsection (3) happened before the commutation—the time just before the earliest of those events happens. (a) references in that section to the later income stream (in relation to a time, or event happening, before the payment of that involuntary roll‑over superannuation benefit) include references to the earlier income stream; and (b) references in that section to the superannuation interest supporting the later income stream (in relation to a time, or event happening, before the payment of that benefit) include references to the earlier interest. (1) This section applies for the purposes of working out the amount of your total superannuation balance just before 1 July 2017. (2) The transfer balance mentioned in paragraph 307‑230(1)(b) of the Income Tax Assessment Act 1997 just before 1 July 2017 is taken to be equal to: (a) the sum of the transfer balance credits (if any) in your transfer balance account just after the start of 1 July 2017; less (b) the sum of the transfer balance debits (if any) arising in your transfer balance account on 1 July 2017 under item 4 of the table in subsection 294‑80(1) of that Act (about payment splits). (1) Section 307‑231 of the Income Tax Assessment Act 1997 applies in relation to borrowings that arise under contracts entered into on or after 1 July 2018. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2018 is treated as if it arose under a contract entered into before 1 July 2018 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) treat a deduction made under former section 279 of the Income Tax Assessment Act 1936 as having been made under section 295‑465 of the Income Tax Assessment Act 1997 instead; and (b) treat a deduction made under former section 279B of the Income Tax Assessment Act 1936 as having been made under section 295‑470 of the Income Tax Assessment Act 1997 instead. If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007‑2008 income year is, despite subsection 307‑345(1), the total of: (b) the amount by which $140,000 exceeds the upper limit for the 2006‑2007 income year (worked out under section 159SG of that Act). Division 316 of the Income Tax Assessment Act 1997 applies in relation to demutualisations occurring on or after 1 July 2008. If: (a) any assets held by the benefit funds of a life insurance company that is a friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a complying superannuation fund; and (b) the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer; the transfer is disregarded for any purposes of the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936. (1) In working out the amount that a life insurance company can deduct, in respect of life insurance policies that are disability policies (other than continuous disability policies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income. (2) In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection (1) applies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company’s liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320‑85(4) of that Act. If: (2) If the life insurance company wishes to include a part of an approved asset in its virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑87(2) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society establishes a virtual PST in the 2000‑01 income year, the calculation of the transfer values of the company’s virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year. (1) Subsection (3) applies for the purposes of subparagraph (b)(i) of the definition of virtual PST life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 259 of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007. (2) Subsection (3) also applies for the purposes of subparagraph (b)(i) of the definition of complying superannuation/FHSA life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 47 of Schedule 7 to the First Home Saver Accounts (Consequential Amendments) Act 2008. (3) Treat an annuity as having been purchased out of a superannuation lump sum or an employment termination payment, if the annuity was purchased: (b) out of an eligible termination payment (within the meaning of the Income Tax Assessment Act 1997, as in force just before the commencement mentioned in subsection (1) of this section). (2) If the life insurance company wishes to include a part of an approved asset in its segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (a) a life insurance company had a liability before 1 July 2000 under a life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and (c) there is a transfer of the company’s assets to the segregated exempt assets to meet that liability or that part of the liability; (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑105(1) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320‑225 of the Income Tax Assessment Act 1997 in the 2000‑01 income year, the calculation of the transfer values of the company’s segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year. Section 322‑25 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Part VC of the Insurance Act 1973 after 17 October 2008. 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you > new Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force after the commencement of this section. > old Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. > STS taxpayer means an STS taxpayer within the meaning of Division 328 of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. #### 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years (1) This section applies for the purpose of working out whether you are a small business entity (other than because of subsection 328‑110(4) of the Income Tax Assessment Act 1997) for the 2007‑08 or 2008‑09 income year. (2) You work out your aggregated turnover for the 2005‑06 or 2006‑07 income year as if the amendments made by Schedule 1 to the Tax Laws Amendment (Small Business) Act 2007 had been in force in relation to that year. (a) your aggregated turnover for the 2005‑06 income year (worked out in accordance with subsection (2)) is $2 million or more; but (b) your STS group turnover for that year (worked out under Subdivision 328‑F of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section) is less than $2 million. (2) The following provisions apply as if you are a small business entity for the income year in which you are winding up the business: #### 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you (1) For the purpose of working out whether you are a small business entity for the 2007‑08, 2008‑09, 2009‑10 or 2010‑11 income year (each a relevant income year) for the purposes of a provision to which subsection (3) applies: (2) An entity (the first entity) controls a discretionary trust for a relevant income year if, for any of the 4 income years (a previous income year) before that year: (a) if the previous income year is before the 2007‑08 income year—the trustee of the trust made a distribution of $100,000 or more to the first entity, any of its affiliates, or the first entity and any of its affiliates; or (i) the trustee of the trust paid to, or applied for the benefit of, the first entity, any of the first entity’s affiliates, or the first entity and any of its affiliates, any of the income or capital of the trust; and (ii) the percentage (the control percentage) of the income or capital paid or applied is at least 40% of the total amount of income or capital paid or applied by the trustee for that year. (1) This section sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (2) This section also sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (3) Any ordinary income that, apart from paragraph 328‑105(1)(a) of the Income Tax Assessment Act 1997 (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have derived before the changeover year (while you were using the STS accounting method) and you have not included in your assessable income because you have not received it is included in your assessable income for the changeover year. (4) Any general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, that, apart from paragraph 328‑105(1)(b) of that Act (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have incurred before the changeover year (while you were using the STS accounting method) and that you have not deducted because you have not paid them can be deducted for the changeover year. (b) for any later income year for which you are a small business entity but only if you used the STS accounting method for the income year before that later year. > Note: Example: You are a small business entity for the 2007‑08 and 2008‑09 income years and you continue to use the STS accounting method for those years. You are not a small business entity for the 2009‑10 income year so you cannot continue to use the STS accounting method for that year. Because you cannot use the STS accounting method for the 2009‑10 income year, you will not be able to use it again for a later income year even if you are a small business entity for that later year. In sections 328‑115 and 328‑120, STS accounting method means the accounting method that was required by the Income Tax Assessment Act 1997 to be used by STS taxpayers for the 2004‑05 income year. (b) you made a choice under subsection 328‑175(3) of old Subdivision 328‑D in relation to a depreciating asset you use to carry on a primary production business and for which you could deduct amounts under Subdivision 40‑F or 40‑G of the Income Tax Assessment Act 1997. (2) In determining whether you can choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997 in an increased access year, disregard subsection 328‑175(10) of that Act. (3) In applying paragraph 328‑175(10)(b) of that Act for the purpose of determining whether you can choose to use that Subdivision in any income year after the increased access years, disregard: (4) Paragraph 328‑180(1)(b) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that paragraph to $1,000: (i) first used the asset, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (i) first used the asset, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (i) first used the asset, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, on or after 1 July 2023 and on or before 30 June 2026. (a) a reference in that paragraph to the end of the income year in which you start to use the asset, or have it installed ready for use, for a taxable purpose were a reference to the earlier of: if: (i) first used the asset, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021. (5) Paragraph 328‑180(2)(a) or (3)(a) of the Income Tax Assessment Act 1997 applies to an amount included in the second element of the cost of an asset as if a reference in that paragraph to $1,000: (5A) For the purposes of determining whether, under subsection 328‑180(2) of the Income Tax Assessment Act 1997, you can deduct, for an income year (the current year), the taxable purpose proportion of an amount included in the second element of the cost of an asset, disregard paragraph (b) of that subsection if: (2) For the purposes of determining whether subsection 328‑180(1) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (b) of that subsection (which sets a limit of $1,000 on the cost of the asset) if, in the period beginning at the 2020 budget time and ending on 30 June 2023, you: (3) For the purposes of determining whether subsection 328‑180(2) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (a) of that subsection (which sets a limit of $1,000 on the amount) if the amount is included in the second element of the cost of the asset at any time in the period beginning at the 2020 budget time and ending on 30 June 2023. (4) In applying paragraph 328‑180(3)(a) of the Income Tax Assessment Act 1997 to an asset, disregard an amount included in the second element of the cost of the asset if the amount is deducted under subsection 328‑180(2) of that Act, as modified by subsection (3) of this section. (5) Section 328‑210 of the Income Tax Assessment Act 1997 applies as if the words “less than $1,000 but” in subsection (1) were disregarded, in relation to a deduction for an income year that ends: Subsection 328‑190(2) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that subsection to 15% were a reference to 57.5% if you are covered by section 40‑125 for the asset (which is about backing business investment). (1) A depreciating asset of yours that had been allocated to your general STS pool is treated as being allocated to your general small business pool. (2) A depreciating asset of yours that had been allocated to your long life STS pool is treated as being allocated to your long life small business pool. (3) If you made a choice, under subsection 328‑185(5) of old Subdivision 328‑D, not to have a depreciating asset allocated to your long life STS pool, the choice has effect for the purposes of subsection 328‑185(5) of new Subdivision 328‑D. (1) This section applies if a depreciating asset of yours is treated as being allocated to your general small business pool or long life small business pool under section 328‑185. (2) The opening pool balance of your general small business pool or long life small business pool for the 2007‑08 income year is taken to be the closing pool balance of your general STS pool or long life STS pool, as the case requires, for the 2006‑07 income year, reduced or increased by any adjustment required under section 328‑225 of new Subdivision 328‑D (about change in the business use of an asset). (a) you were not an STS taxpayer for the 2006‑07 income year (because you stopped being an STS taxpayer before that time); but (b) you are a small business entity for the 2007‑08 income year or a later income year and you choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets for that income year; the opening pool balance of your general small business pool or long life small business pool includes the sum of the taxable purpose proportions of the adjustable values of depreciating assets allocated to the pool under subsection 328‑185(3) of new Subdivision 328‑D for that year. (1) This section applies for the purposes of applying Subdivision 328‑D of the Income Tax Assessment Act 1997 for the 2012‑13 income year and later income years. (2) A depreciating asset that had been allocated to your long life small business pool is treated as being allocated to your general small business pool. (a) the closing pool balance of your general small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under section 328‑225 of that Act; and (b) the closing pool balance of your long life small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under that section. (1) This section applies if you chose to stop being an STS taxpayer for the 2005‑06 income year or the 2006‑07 income year. (2) You cannot choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets until at least 5 years after the income year for which you chose to stop being an STS taxpayer. > Note: Subdivision 328‑D of the Income Tax Assessment Act 1997 continues to apply to depreciating assets that have been allocated to your small business pools even if you are not a small business entity, or do not choose to use that Subdivision, for an income year: see section 328‑220 of that Subdivision. (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct 20% of particular expenditure for your 2023‑24 income year if: (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (d) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑450 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (6) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (ii) if the provider is a registered body of a kind listed in paragraph (2)(b), (c) or (d)—the training is within the provider’s scope of registration for that kind of registered body; and (d) each enrolment, or arrangement, for the provision of the training is made or entered into at or after 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022; and > Note: Paragraphs (b) and (c) mean this section will not apply to expenditure for on‑the‑job training or training provided by you in house. (a) a registered higher education provider (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); (b) a NVR registered training organisation (within the meaning of the National Vocational Education and Training Regulator Act 2011); (c) a registered education and training organisation (within the meaning of the Education and Training Reform Act 2006 (Vic.)); (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct for your 2023‑24 income year an amount that is equal to the sum of: (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (3) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑460 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (4) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (b) you incur the expenditure in the period starting at 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022 and ending at the end of: (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (4) For the purposes of paragraphs (1)(c) and (2)(c), in working out whether you can deduct an amount of expenditure on a depreciating asset, assume that: (b) throughout that effective life, you will use the asset for a taxable purpose to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose. (a) 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑470(1) or (3) applies in relation to the income year; and > Note: The deduction relates to the period of 1 July 2023 to 30 June 2024. An entity may have deducted an amount under paragraph (a) for a previous income year if the entity has a substituted accounting period. (2) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑470 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (3) Sections 8‑10, 40‑215 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (c) you start to use the asset, or have it installed ready for use, for any purpose after 30 June 2023 but before 1 July 2024; and (d) you start to use the asset, or have it installed ready for use, for a taxable purpose at a time (the start time) that is: (e) you are a small business entity, or an entity covered by subsection (4), for the income year that includes the start time; and (h) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) a new reasonably comparable depreciating asset that uses a fossil fuel (other than a use of which that is merely incidental) is available in the market at the start time; (ii) if the asset is being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than the other asset; (iii) if the asset is not being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than a new reasonably comparable depreciating asset that is available in the market at the start time; or (i) a depreciating asset (other than an asset excluded under subsection (6)) that uses electricity, or energy that is generated from a renewable source, to be more energy efficient; (iv) the use of electricity, or energy that is generated from a renewable source, by another depreciating asset to be monitored. (a) the amount is included in the second element of a depreciating asset’s cost under paragraph 40‑190(2)(a) of the Income Tax Assessment Act 1997; and (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (d) you are a small business entity, or an entity covered by subsection (4), for the income year in which the expenditure is incurred; and (i) if the asset could use a fossil fuel (other than a use of which that is merely incidental)—the asset to only use electricity, or energy that is generated from a renewable source; (ii) if the asset uses electricity, or energy that is generated from a renewable source—the asset to be more energy efficient; (g) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) For the purposes of paragraph (1)(b) or (3)(b), in working out whether you can deduct an amount of expenditure assume that: (i) for the purposes of paragraph (1)(b)—to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose; or (ii) for the purposes of paragraph (3)(b)—to the same extent as you use it for a taxable purpose in the income year in which the expenditure is incurred. (b) expenditure (other than expenditure referred to in subparagraph (3)(e)(i)) on an asset that can use a fossil fuel (other than a use of which that is merely incidental); (c) an asset that solely or predominantly generates electricity from a renewable source (for example, photovoltaic cells) or expenditure on such an asset; (d) an asset, or expenditure, being capital works for which you can deduct an amount under Division 43 of the Income Tax Assessment Act 1997; > Note: Subsections (1) and (3) also do not apply to an item of trading stock because such an asset is not a depreciating asset: see section 40‑30 of the Income Tax Assessment Act 1997. A reference in each of the following provisions of the Income Tax Assessment Act 1997 to a registration under section 27A of the Industry Research and Development Act 1986 includes a reference to a registration under former section 39J of that Act: (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) the R&D entity cannot deduct an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from: (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D entity could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:22pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the R&D entity is taken to be able to deduct under subsection 355‑315(2) of the new Act that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the R&D entity’s assessable income for the event year under subsection 355‑315(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 for the asset, the R&D entity is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑446 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the R&D entity is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑465 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: Section 355‑315 of the new Act would otherwise apply for the event in a case where the R&D entity had new law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by an R&D partnership; and (i) the partner can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the partner chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D partnership could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the partner is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:21.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D entity</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D partnership</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the partner is taken to be able to deduct under subsection 355‑525(2) of the new Act the partner’s proportion of that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the partner’s assessable income for the event year under subsection 355‑525(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partner’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if one or more partners (including the partner) in the R&D partnership is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset, the partner is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑448 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the partner is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑467 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s deductions under section 355‑520 of the new Act mentioned in subsection (4A) of this section. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the partner for the event, do so apply to the partner for the event. > Note 1: Section 355‑525 of the new Act would otherwise apply for the event in a case where the partner had new law deductions. Item 7 of the table in subsection 57‑110(2) in Schedule 2D to the Income Tax Assessment Act 1936 applies as if the deduction rules set out in the final column of that item also included former sections 73BA and 73BH of the Income Tax Assessment Act 1936. For the purposes of step 1 of the method statement in subsection 355‑415(2) of the Income Tax Assessment Act 1997, also disregard amounts that have already been taken into account under former subsection 73B(14AA) of the Income Tax Assessment Act 1936 for the R&D entity, the grouped entity and the R&D activities for an earlier income year. (1) This section applies if, apart from former paragraph 73B(10)(a) of the Income Tax Assessment Act 1936, an eligible company could deduct advance R and D expenditure in one or more income years commencing on or after 1 July 2011. > Note: That deduction would be under former section 73B of that Act as that former section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (a) apart from Subdivision H (prepaid expenditure) of Division 3 of Part III of the Income Tax Assessment Act 1936, an eligible company can deduct an amount under former section 73B, 73BA, 73BH, 73QA, 73QB or 73Y of that Act for an income year commencing before 1 July 2011; and (c) apart from former paragraph 73B(10)(a) of that Act, the eligible company could deduct an amount, as a result of that application of that Subdivision, for an income year commencing on or after 1 July 2011. > Note: That deduction would be under that Act as it applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (3) Former paragraph 73B(10)(a) of that Act is taken to apply to those income years commencing on or after 1 July 2011 as if the reference in that former paragraph to section 39J of the Industry Research and Development Act 1986 were a reference to section 27A of that Act. (4) An expression used in this section that is also used in former section 73B of the Income Tax Assessment Act 1936 has the same meaning in this section as it has in that former section. This Subdivision applies to core technology (within the meaning of former section 73B of the Income Tax Assessment Act 1936) if: (a) you incurred core technology expenditure (within the meaning of that former section) in an income year commencing before 1 July 2011 in relation to the core technology under one or more contracts entered into at or after the time referred to in former subsection 73B(12) of that Act; and (b) that expenditure (the undeducted expenditure) cannot be deducted for the last income year commencing before 1 July 2011. (1) This section applies for the purposes of Division 40 of the Income Tax Assessment Act 1997, other than sections 40‑292 and 40‑293 of that Act, if the core technology (the asset) is a depreciating asset. (2) Disregard this section, including its effect on the amount you can deduct under section 40‑25 of that Act for the asset, for the purposes of working out: (3) The asset’s opening adjustable value for the first income year that commences on or after 1 July 2011 (the first new income year) is equal to the amount of the undeducted expenditure. (4) Subsection 40‑75(2) of the Income Tax Assessment Act 1997 applies to the asset as if the first new income year were a change year (within the meaning of that subsection). If the core technology is not a depreciating asset, you can deduct the undeducted expenditure in equal proportions over a period of 5 income years starting in the first income year commencing on or after 1 July 2011. To work out the film component (if any) of your tax loss for the 1997‑98 income year or a later income year, apply former section 375‑805 of the Income Tax Assessment Act 1997. If you incurred a film loss for the purposes of former section 79F (Film losses of 1989‑90 to 1996‑97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989‑90 to 1996‑97 income years, that film loss is the film component of your tax loss for that income year. (1) To work out your film loss (if any) for the purposes of the Income Tax Assessment Act 1997 for the 1989‑90 or a later income year, apply former section 375‑810 of that Act. (2) You can deduct in the 1997‑98 or a later income year your film loss for any of the 1989‑90 to 1996‑97 income years only to the extent that it has not already been deducted. (1) Division 392 of the Income Tax Assessment Act 1997 applies to assessments for the 1998‑99 income year and later income years. (a) it had applied to your assessment for each income year before the 1998‑99 income year for which Division 16 of Part III of the Income Tax Assessment Act 1936 applied in relation to your income; and (b) you had carried on a primary production business during each income year before the 1998‑99 income year when you carried on a business of primary production; and (c) for each income year before the 1998‑99 income year you had a basic taxable income equal to your taxable income for the income year for the purposes of Division 16 of Part III of the Income Tax Assessment Act 1936. > Note: Section 149A of the Income Tax Assessment Act 1936 identifies what your taxable income for an income year is for the purposes of Division 16 of Part III of that Act. Division 392 of the Income Tax Assessment Act 1997 does not apply to your assessment for the 1998‑99 income year or a later income year if you made an election under section 158A (Election that Division not apply) of the Income Tax Assessment Act 1936 relating to an income year before the 1998‑99 income year. 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 A reference in Division 393 of the Income Tax Assessment Act 1997 to a deduction under section 393‑5 of that Act for making a farm management deposit is taken to include a reference to a deduction under section 393‑10 in Schedule 2G to the Income Tax Assessment Act 1936, as in force just before the commencement of this section, if the deposit was made before the 2010‑11 income year. #### 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 (b) the deposit was made with an FMD provider as a result of a request to which section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, applied; the unrecouped FMD deduction in respect of the deposit at that time is equal to the amount of the unrecouped deduction (within the meaning of the former subsection 159GA(3) of the Income Tax Assessment Act 1936) in respect of the deposit immediately before it ceased to be a deposit under the Loan (Income Equalization Deposits) Act 1976. > Note: This means that the unrecouped deduction relating to the deposit under the Loan (Income Equalization Deposits) Act 1976 continues to apply (by becoming an unrecouped FMD deduction) when the deposit is transferred to an FMD provider as a farm management deposit. The Loan (Income Equalization Deposits) Act 1976 was repealed on 22 February 2005. If a beneficiary of a trust was covered by paragraph (c) of the definition of primary producer in section 393‑25 in Schedule 2G to the Income Tax Assessment Act 1936 in the 2009‑10 income year, treat subsection 393‑25(3) of the Income Tax Assessment Act 1997 as having applied to the beneficiary for the purpose of determining the maximum number of choices that the trustee may make under subsection 393‑27(2) of that Act for the 2010‑11 income year. (a) a farm management deposit of an owner was unclaimed moneys for the purposes of section 69 of the Banking Act 1959; and (2) For the purpose of subsection 393‑10(1) of the Income Tax Assessment Act, treat the repaid unclaimed moneys as a repayment of the deposit of the owner. (3) To avoid doubt, the payment of unclaimed moneys to the Commonwealth under section 69 of the Banking Act 1959 is not a repayment of the deposit of the owner for the purposes of Division 393 of the Income Tax Assessment Act 1997. 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 #### 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 If a farm management deposit was made with an FMD provider as a result of a request under section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, then: (a) subsections 393‑40(1) to (4) of the Income Tax Assessment Act 1997 apply as if the day the deposit was made was the day on which the deposit was originally made under the Loan (Income Equalization Deposits) Act 1976; and (1) A copyright collecting society to which section 51‑43 of the Income Tax Assessment Act 1997 applies, may elect that, from 1 July 2004, the section apply to all ordinary income, and statutory income, collected or derived by the society on or after 1 July 2004. Division 420 of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division. Subdivision 615‑C of the Income Tax Assessment Act 1997 applies to you with the modifications set out in this Subdivision if you chose to obtain a roll‑over involving \*shares or units that: (b) were your trading stock, or revenue assets, at the time immediately before that disposal, redemption or cancellation. (1) Disregard subparagraph 615‑45(a)(ii), and paragraph 615‑45(b), of the Income Tax Assessment Act 1997 if the roll‑over relates to \*shares that were disposed of, redeemed or cancelled. (2) For each of the \*shares in the interposed company that you acquired in return for those of your shares or units in the original entity that were your \*trading stock at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  (2) For the purpose of calculating any profit or loss on a future disposal, cessation of ownership, or other realisation of a \*share in the interposed company that you acquired in return for those of your shares or units in the original entity that were \*revenue assets at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  Subdivision 620‑A of the Income Tax Assessment Act 1997 applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. (1) Part 3‑90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Act (No. 1) 2002 and amended by: (2) Section 713‑50 of the Income Tax Assessment Act 1997 (about factors to consider in determining destination of distribution by non‑fixed trust) applies for the purposes of this Part in the same way as it applies for the purposes of Part 3‑90 of that Act. ### Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly‑owned subsidiary of the entity (the future head company) that became the head company of the group; or (ii) at some time during that period, the entity was a wholly‑owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (ii) it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (1) If a group is a transitional group, its head company may, subject to subsection (3), choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (3) If the choice is to be made after the end of the period mentioned in paragraph (2)(a) and before the end of the day mentioned in paragraph (2)(b), it cannot be made unless each entity in relation to which the conditions in subsection (5) are satisfied has agreed to it being made. (a) the entity (the leaving entity) ceased to be a subsidiary member of the group before the choice was made (in a subsection (3) case) or before the revocation took place (in a subsection (4) case); and (b) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; and (c) the asset had become that of the head company because that section applied when a chosen transitional entity (whether or not the same entity as the leaving entity) became a subsidiary member. Section 716‑855 applies for the purposes of this Division in the same way as that section applies for the purposes of Part 3‑90 of the Income Tax Assessment Act 1997. is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705‑B of that Act and with this Division. 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity Section 701‑10 (cost to head company of assets of joining entity) and subsection 701‑35(4) (setting value of trading stock at tax‑neutral amount) of the Income Tax Assessment Act 1997 do not apply to the assets of a chosen transitional entity. > Note: The fact that the head company inherits the entity’s history under section 701‑5 of that Act when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time. #### 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities (2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non‑chosen subsidiary) is worked out in a special way. (b) for each sub‑group (see subsection (6)) that exists in relation to the non‑chosen subsidiary—the sub‑group’s notional allocable cost amount (see subsection(5)) for the non‑chosen subsidiary. (4) The head company adjusted allocable amount for the non‑chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if; (b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of head company’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub‑group in relation to the non‑chosen subsidiary. (5) For each sub‑group that exists in relation to the non‑chosen subsidiary, there is a sub‑group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non‑chosen subsidiary if: (a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non‑chosen subsidiary and the entities comprising the sub‑group; and (c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub‑group membership interests (see subsection (6)) in relation to the sub‑group, and any such entity held those membership interests during the period when it actually held them; and (d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of chosen transitional entity’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub‑group. (6) If a chosen transitional entity holds membership interests in a non‑chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non‑chosen subsidiary: (a) the chosen transitional entity and each interposed non‑chosen subsidiary comprise a sub‑group in relation to the non‑chosen subsidiary (unless the non‑chosen subsidiary is included in a sub‑group in relation to another non‑chosen subsidiary); and (i) the membership interests that the chosen transitional entity holds directly in the non‑chosen subsidiary or in any of the interposed non‑chosen subsidiaries; (ii) the membership interests that each interposed non‑chosen subsidiary holds directly in the non‑chosen subsidiary or in any of the other interposed non‑chosen subsidiaries. #### 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities If any provision of the Income Tax Assessment Act 1997 would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply. > Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred. (1) This section has effect for the purposes of applying section 705‑70 (step 2 of allocable cost amount) of the Income Tax Assessment Act 1997 in relation to a transitional entity. (2) In spite of subsection 705‑70(1A) of that Act, if the amount of an accounting liability of the transitional entity would be different when it becomes an accounting liability of the transitional group, that difference is not taken into account in working out the amount of the liability. #### 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different (a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset (the roll‑over asset) for which there was: (ii) roll‑over relief under section 40‑340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and (i) became an asset of the head company when the transitional group came into existence because subsection 701‑1(1) (the single entity rule) of that Act applies; or differs at that time from what it would have been if the act, transaction or event that gave rise to the CGT event had not occurred in relation to the roll‑over asset; then the provisions mentioned in subsection (2) apply as if the act, transaction or event had not occurred in relation to the roll‑over asset. (a) the act, transaction or event mentioned in subsection (1) happened before a demerger and in connection with the demerger; and (b) before the transitional group came into existence, at least one of the following entities ceased to be a member of the demerger group because of the demerger: (i) the originating company in relation to the roll‑over, or the transferor in relation to the roll‑over relief, was a foreign resident; and (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as a transitional foreign‑held subsidiary of the group. #### 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets (1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied. (2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset. (a) the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and (b) former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset. (4) The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group. (6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses. #### 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets (b) just before the transitional group came into existence, the entity that became the head company held a pre‑CGT asset; and (d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre‑CGT asset and is held by the head company only because the entity is taken by subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company. (2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence. #### 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity (1) This section provides for an addition to the step 1 amount for working out under section 711‑20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity) that ceases to be a subsidiary member of the transitional group at a time (the leaving time), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701‑1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount for paragraph</span><span> </span><span>(2)(c)</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">If, because of the circumstances described in paragraphs</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(a) and (b):</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">The amount is:</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:180.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following provisions applied to the entity:</span></p><p class="Tablea"><span>(a) former section</span><span> </span><span>61A of the </span><span style="font-style:italic">Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(b) former Subdivision</span><span> </span><span>57</span><span>‑</span><span>I in Schedule</span><span> </span><span>2D to the</span><span style="font-style:italic"> Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(c) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(4) of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td><td style="width:148.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the amount treated as being the cost of the asset under that provision; and</span></p><p class="Tablea"><span>(b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>2</span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following subsections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span><span> applied to the entity:</span></p><p class="Tablea"><span>(a) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(5);</span></p><p class="Tablea"><span>(b) 58</span><span>‑</span><span>70(3)</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The amount treated as being the cost, or the first element of the cost, of the asset under that subsection</span></p></td></tr></tbody></table> ``` (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997, as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="4" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amounts and provisions for different dates of acquisition</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Date of the acquisition</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Amount</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Provision of Division</span><span style="font-weight:bold"> </span><span style="font-weight:bold">58 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> applying to the acquisition and the working out of the amount</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:76.7pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>160</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>220</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>After 30</span><span> </span><span>June 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>First element of the cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subsection</span><span> </span><span>58</span><span>‑</span><span>70(5)</span></p></td></tr></tbody></table> ``` > Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. > Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and ### Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: #### 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70‑45 to 70‑70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420‑51 to 420‑58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (a) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority‑owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority‑owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority‑owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority‑owned entity became a subsidiary member of the group, there was roll‑over relief under section 40‑340 of the Income Tax Assessment Act 1997. (a) while the asset is, because subsection 701‑1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, its tax cost setting amount is taken to be equal to the continuing majority‑owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711‑30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997. (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset becomes that of an entity (a new asset holder) other than the head company because subsection 701‑1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder) acquiring some or all of the membership interests in the new asset holder; and (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset is acquired by another entity (a new asset holder) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll‑over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value asset just before the acquisition; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 #### 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 (b) members of the consolidated group or the MEC group mentioned in subsection 104‑500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701‑1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701‑1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (3) If this section applies, neither subsection 104‑500(4) nor subsection 104‑500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year. ### Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C‑B); and (b) modifies certain rules in Part 3‑90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C‑C). > Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719‑2 and 719‑10 of this Act). 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership #### 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(ii) of that Act (see subsection 719‑2(3) of this Act). (b) a trust (a non‑resident trust) that does not meet the requirements in any item of the table in section 703‑25 of the Income Tax Assessment Act 1997. (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non‑resident company or a non‑resident trust; or Test entity must be a subsidiary member on assumption that non‑resident companies and non‑resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non‑resident company or non‑resident trust were a subsidiary member of the group. (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv). #### 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(iii) of that Act (see subsection 719‑2(3) of this Act). (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C‑10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3). If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C‑10 are met; and (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (ii) an entity that is a transitional foreign‑held indirect subsidiary of the group because of another application of this paragraph; Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign‑held indirect subsidiary would need to have satisfied the set of requirements in either section 701C‑10 or 701C‑15 (1) This Subdivision applies if an entity (the transitional foreign‑held joining entity) that is a transitional foreign‑held subsidiary or a transitional foreign‑held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time) the group comes into existence. (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign‑held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign‑held indirect subsidiary that becomes a subsidiary member at that time takes account of this. (a) section 701‑10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); apply, for the purposes of setting the tax cost of an asset of the transitional foreign‑held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign‑held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. > Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign‑held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign‑held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign‑held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign‑held subsidiary and the other entity. > Note 2: If the transitional foreign‑held joining entity is a transitional foreign‑held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705‑A of the Income Tax Assessment Act 1997, in its application in accordance with Subdivision 705‑B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company. Subsection 701‑35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax‑neutral amount) does not apply to the assets of the transitional foreign‑held joining entity if it is a transitional foreign‑held subsidiary. Section 701‑15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: (a) this section applies to each membership interest in the transitional foreign‑held subsidiary that is held by an entity (an eligible non‑resident) of a kind mentioned in subparagraph 701C‑20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign‑held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701‑1(2) of the Income Tax Assessment Act 1997 applies to the eligible non‑resident in the same way as it applies to the head company. Section 711‑5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: > Note: If the leaving entity is a transitional foreign‑held subsidiary (within the meaning of section 701C‑20 of the Income Tax (Transitional Provisions) Act 1997), this Division will, in accordance with subsection 701‑15(4) of this Act (see section 701C‑40 of the first‑mentioned Act), apply to membership interests that an eligible non‑resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity. (1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707‑C of the Income Tax Assessment Act 1997. (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period. (1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if: (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (d) the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997. (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: (1) The head company of a consolidated group may make a choice in the approved form to apply section 701D‑10 to another entity. (2) However, the head company cannot make that choice if subsection 701D‑10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (a) an asset of the head company because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701‑55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40‑77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40‑77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40‑285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount. (b) after the asset became an asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). > Note: The final entity will be different from the head company if an entity (the leaving entity) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40‑285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. > Note: The final entity will be entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701‑5 (the entry history rule) of that Act and perhaps also section 701‑40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity) became a subsidiary member of the group; and It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). > Note: In some cases, section 705‑47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40‑285(3) of this Act. If: (b) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and subsection 40‑285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701‑10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997. > Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997. (1) For the purposes of Part 3‑90 of the Income Tax Assessment Act 1997, this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960‑G of that Act whether the interest or right is a membership interest of the entity in the other entity. > Note: Under Subdivision 960‑G of the Income Tax Assessment Act 1997, a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001) apply to transactions in relation to the interest or right at the relevant time. Despite the amendments of section 703‑35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) If an entity (the joining entity) to which section 40‑75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time), this Subdivision applies in relation to: (ii) became assets of the head company of the group at the joining time because of section 701‑1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure. (1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). (2) If the joining entity could not deduct an amount under Subdivision 40‑B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701‑55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40‑35, 40‑37, 40‑40 or 40‑43 treated the joining entity as holding a notional asset. > Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705‑30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. (a) deductions under former Subdivision 330‑A, 330‑C or 330‑H of the Income Tax Assessment Act 1997, or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated an entity as holding because of the expenditure. (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); > Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40‑75(4) of this Act, but may have been reset since under Subdivision 40‑B of the Income Tax Assessment Act 1997. > Note 2: The effective life of a notional asset is specified by whichever one of sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act is relevant to the notional asset. (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (9) Section 705‑55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705‑45 of that Act. > Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705‑40 of the Income Tax Assessment Act 1997. (a) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701‑5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. > Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705‑305(3). (ii) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707‑A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member. 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value #### 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707‑320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor) other than the real loss‑maker mentioned in subsection 707‑315(1) of that Act for the bundle; and (b) both the real loss‑maker and the value donor became members of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (ca) neither the real loss‑maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (ii) a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (ii) section 713‑540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (2) It must have been possible for the real loss‑maker to have transferred the loss to the value donor under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss‑maker at the initial transfer time the amount worked out using the formula:  > Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707‑327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss‑maker to the transferee. > total of real loss‑maker’s non‑foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss‑makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) included in a bundle of losses: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. #### 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value (1) This section affects the calculation of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707‑325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936, in the bundle). > Note: This section does not affect the calculation of the real loss‑maker’s modified market value for other purposes (such as the real loss‑maker being a value donor for the purposes of another application of section 707‑325 of this Act). (3) One condition is that the event was an injection of capital directly into the real loss‑maker by the value donor mentioned in section 707‑325 of this Act. (c) that would have caused subsection 707‑325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss‑maker’s modified market value (even if no other events described in subsection 707‑325(4) of that Act had occurred), apart from this section. (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss‑maker (whether or not the event also involved either the value donor or the real loss‑maker); or (1) This section has effect for the purposes of working out under Subdivision 707‑C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707‑325, as if there were added to the modified market value of the real loss‑maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (c) the loss is not a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707‑A of that Act at the initial transfer time had the company: > Note: This section has effect even if the amount added to the real loss‑maker’s modified market value under section 707‑325 is nil because the value donor’s modified market value is nil. (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707‑325, as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (4) If the transferee mentioned in subsection 707‑325(1) chooses, sections 707‑310, 707‑335 (except paragraph 707‑335(2)(a)) and 707‑340 of the Income Tax Assessment Act 1997 (and subsections 707‑315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: > Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707‑325(1)(d) and (e) and subsection 707‑325(2) in an application of section 707‑325 separate from the application of that section mentioned in paragraph (1)(a) of this section. > Note: This means that a loss that provided a basis for section 707‑325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. (b) in connection with the requirement that it must have been possible for a company (the notional transferor) to transfer to another company (the notional transferee) for an income year a loss under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997. (b) ends immediately after the initial transfer time mentioned in subsection 707‑320(1) of the Income Tax Assessment Act 1997. > Note: For the purposes of identifying the trial year using the definition in section 707‑120 of the Income Tax Assessment Act 1997, the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time. (1) Subsection (3) of this section affects the calculation, under section 707‑325 of the Income Tax Assessment Act 1997 and section 707‑325 of this Act, of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (the formation time) the group became a consolidated group; and (b) the provisions described in subsection 707‑327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707‑327(1)(b) and (c) of this Act as if the bundle included the loss; and (d) subsection 707‑325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707‑325(1) of this Act chooses that this section apply in relation to the real loss‑maker. (2) Section 707‑325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. (3) Disregard for the purposes of subsection 707‑325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707‑325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or > Note: Disregarding such an event could have a direct or indirect effect on the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss‑maker’s modified market value calculated under section 707‑325 of the Income Tax Assessment Act 1997, if the real loss‑maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707‑325 of this Act to add an amount to the real loss‑maker’s modified market value for those purposes. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) that: (b) was transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from an entity other than the real loss‑maker. (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997. Disregard an event that is described in subsection 707‑325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707‑325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004. (1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss‑maker) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time) the transferee became the head company of a consolidated group; and (ii) the conditions in one or more of paragraphs 165‑15(1)(a), (b) and (c) did not exist in relation to the real loss‑maker; and (da) the real loss‑maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non‑transferred losses) of the same sort that the transferee made without a transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non‑transferred losses). (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. <table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Limit on utilising the losses</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For this income year:</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the losses that the transferee may utilise cannot exceed:</span></p></td></tr></thead><tbody><tr><td style="width:20.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:120.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The first income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span style="font-size:8pt; vertical-align:2pt">1</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The second income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) </span><span style="font-size:8pt; vertical-align:2pt">2</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the amount of the losses utilised for the income year mentioned in item</span><span> </span><span>1</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The third income year ending after the initial transfer time, or a later income year</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time</span></p></td></tr></tbody></table> ``` (4) Subdivision 707‑C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707‑A of that Act. > Note: This has 2 effects. First, Subdivision 707‑C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707‑A of that Act). (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). (7) This section does not limit the transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company. In working out when a choice may be made under subsection 707‑325(5), 707‑327(5), 707‑328A(4) or 707‑350(5), ignore losses to which section 713‑535 of the Income Tax Assessment Act 1997 applies. > Note: That section deals with losses transferred under Subdivision 707‑A of that Act from certain wholly‑owned subsidiaries of life insurance companies that are members of a consolidated group. Section 707‑405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act. (1) This section reduces the adjustable value of a notional asset that section 40‑35, 40‑37, 40‑38, 40‑40 or 40‑43 treats the head company of a consolidated group as holding, if: (b) that section treats the leaving entity as holding a notional asset because of section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997. > Note: Section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time. The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences. (1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event) happening involving an entity (the originating entity) and another entity (the recipient entity) if: (a) the event occurs in connection with a life insurance company (the member life insurance company) becoming a member of a consolidated group; and (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest) in a company or in another trust. (a) a life insurance company transfers an asset (also the original asset) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320‑200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset) to its segregated exempt assets where, apart from this Subdivision, section 320‑255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event) is made in connection with the life insurance company (also the member life insurance company) becoming a member of a consolidated group. (1) This Subdivision applies only if the originating entity (for a section 713‑505 case) or the life insurance company (for a section 713‑510 case) chooses that it apply. (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713‑510 of the Income Tax Assessment Act 1997; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713‑510 of the Income Tax Assessment Act 1997; and (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs. This Act, and the Income Tax Assessment Act 1997, apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group. (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain) that the originating entity would have made as a result of the deferral event is disregarded; and (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount) under paragraph 320‑15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (1) This section operates if, after the deferral event happens, another event (the new event) happens where the new event is: (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (i) the original asset being transferred to or from the company’s virtual PST under section 320‑180, 320‑185 or 320‑195 of the Income Tax Assessment Act 1997; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320‑235, 320‑240 or 320‑250 of that Act; or (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. > Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713‑505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (1) For a section 713‑505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713‑535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: (a) an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group at a time (the leaving time); and (b) but for the cessation of membership and section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision. Sections 716‑340 and 716‑345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. <table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:345.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Extended operation of sections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 1</span><br><span style="font-weight:bold">Sections</span><span style="font-weight:bold"> </span><span style="font-weight:bold">716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">340 and 716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">345 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> operate in relation to:</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 2</span><br><span style="font-weight:bold">In the same way as they operate in relation to:</span></p></td></tr></thead><tbody><tr><td style="width:5.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:161.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>46</span><span>‑</span><span>90 of that Act</span></p></td><td style="width:156.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>40</span><span>‑</span><span>455 of that Act</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software pool created under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure allocated to a software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Software, expenditure on which was in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>In</span><span>‑</span><span>house software, expenditure on the development of which is allocated to a software development pool</span></p></td></tr></tbody></table> ``` (1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: Section 703‑30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004. (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time) a wholly‑owned subsidiary of the entity that became the head company of the group (the head entity), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier‑1 company of the group at the formation time. Despite the amendment of section 719‑30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) Section 719‑160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719‑160(3) of the Income Tax Assessment Act 1997. (3) However, that effect of section 719‑160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division. (2) Paragraphs 701‑1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier‑1 company at the time the MEC group came into existence. (a) the entity and one or more other entities were members of a potential MEC group as eligible tier‑1 companies, throughout the period: (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier‑1 company, at the time the transitional group came into existence. To avoid doubt, sections 707‑325 and 707‑327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719‑305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707‑A of that Act. Subsection 719‑325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006. (1) A reference in an agreement to item 25 of the table in subsection 721‑10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: (1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: Division 725 applies to a scheme entered into on or after 1 July 2002. It also applies to a scheme entered into on or after 27 June 2002, but only if: ### Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (1) Division 727, as inserted by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 and amended by the New Business Tax System (Consolidation and Other Measures) Act 2003, applies to a scheme entered into on or after 1 July 2002. (b) a presumed indirect value shift that happens under the scheme and affects a realisation event that happens on or after 1 July 2002. (a) the economic benefits taken into account in determining that the scheme has resulted in that indirect value shift or presumed indirect value shift include economic benefits provided by: > Note: In that case, the consequences of the trigger event are worked out under Division 138 or 139 of the Income Tax Assessment Act 1997: see items 13 and 14 of Schedule 15 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002. (1) An indirect value shift does not have consequences under Division 727 of the Income Tax Assessment Act 1997 if, to the extent of at least 95% of their total market value, the greater benefits consist entirely of: (a) a right to have services that are covered by section 727‑240 of that Act provided directly by the losing entity to the gaining entity; or (d) if the losing entity’s 2002‑2003 income year ends before 30 June 2003—the start of the losing entity’s 2004‑2005 income year. (2) For the purposes of section 727‑850 (about a presumed indirect value shift affecting a realisation event) of the Income Tax Assessment Act 1997, subsection (1) of this section applies to the presumed indirect value shift: #### 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (2) Paragraph 727‑470(2)(a) of the Income Tax Assessment Act 1997 (as in force immediately before the commencement of this section) continues to have effect in relation to the indirect value shift as if the repeals and amendments made by Schedule 1, Parts 1 and 2 of Schedule 3 and Schedule 8 to the Tax Laws Amendment (Small Business) Act 2007 had not been made. ## Division 275 Australian managed investment trusts ## Subdivision 275 ‑A—Choice for capital treatment of MIT gains and losses ## 275‑10 Consequences of making choice—Com 275‑10 Consequences of making choice—Commissioner cannot make certain amendments to previous assessments (a) the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and (b) the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities: (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (i) the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or (ii) the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and (f) none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made: (i) Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event; (ii) a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year. (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (b) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (c) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. ## Subdivision 275 ‑L—Modification for non‑arm’s length income 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year ## 275‑605 Trustee taxed on amount of non‑a 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year #### 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year (a) the requirements set out in paragraphs 275‑610(1)(a), (b) and (c) of the Income Tax Assessment Act 1997 are satisfied in respect of an amount of non‑arm’s length income of a managed investment trust in relation to an income year; and (b) the managed investment trust became a party to the scheme mentioned in paragraph 275‑610(1)(a) of that Act before the day on which the Bill that became the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 was introduced into the House of Representatives; and ## Division 276 Attribution managed investment trusts ## Subdivision 276 ‑A—Application ## 276‑5 Application of Division 276 276‑5 Application of Division 276 Division 276 of the Income Tax Assessment Act 1997 as inserted in that Act by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (the amending Act) applies as set out in subitem 1(1) of Schedule 8 to the amending Act. ## Subdivision 276 ‑B—Starting income year ## 276‑25 Starting income year 276‑25 Starting income year (b) if the trustee of the trust has made a choice for the purposes of paragraph 1(1)(b) of Schedule 8 to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016—the first income year starting on or after 1 July 2015; or (c) if the trustee of the trust has made a choice for the purposes of subparagraph 276‑10(1)(e)(i) of the Income Tax Assessment Act 1997 in respect of the 2016‑17 income year—that income year. ## Subdivision 276 ‑T—Becoming an AMIT: unders and overs ## 276‑700 Application of Subdivision to MI 276‑700 Application of Subdivision to MIT that becomes AMIT (c) the trust is an AMIT for an income year (the discovery year) that is the starting income year or a later income year. ## 276‑705 Accounting for unders and overs 276‑705 Accounting for unders and overs for base years before becoming an AMIT (1) This section applies if the trust has an under or over of a character in the discovery year relating to the base year. (b) if, at a time, the trust sent its members distribution statements for an income year that is prior to the starting income year—assume that the trust sent those members AMMA statements for that income year at that time. (3) For the purposes of Division 276 of the Income Tax Assessment Act 1997, treat the under or over mentioned in subsection (1) as an under or over of the AMIT, in the discovery year relating to the base year, of the character mentioned in that subsection. (a) had the under or over mentioned in subsection (1) been discovered before the starting income year, this Act would have operated to produce a particular effect (the pre‑AMIT scheme effect) for the base year in relation to the amount or amounts reflected in the under or over; and ## Subdivision 276 ‑U—Becoming an AMIT: CGT treatment of payment by trustee of AMIT 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT ## 276‑750 Payment by trustee on or after 1 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT #### 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT (b) working out the amount (if any) of the entity’s capital gain under subsection 104‑70(4) of the Income Tax Assessment Act 1997. (3) For the purpose of working out the amount of the non‑assessable part mentioned in paragraph 104‑70(1)(b), treat the following provisions as being in operation at the time the payment was made: (b) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in paragraph (a). (4) Subsection (3) does not apply to the extent (if any) that the entity, in the income tax return that it lodged for the income year in which the payment was made, included the amount of the payment in its assessable income for that income year. (5) For the purposes of section 118‑20 of the Income Tax Assessment Act 1997, treat this section as being in Part 3‑1 of that Act. ## 276‑755 Payment by trustee before 1 July 276‑755 Payment by trustee before 1 July 2011—limit on amendment of assessment (2) The Commissioner cannot amend the entity’s assessment for the income year in which the payment was made in a particular way if: (b) the Commissioner could not amend the assessment in that way if the following provisions were in operation at the time the payment was made: (ii) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in subparagraph (i); and ## Part 3 ‑30—Superannuation (a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and (2) Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001 (the new Act) applies to the plant on this basis: (a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant’s opening adjustable value; and (b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and (c) if you excluded an amount from your assessable income under section 42‑290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999—the cost of the plant, and its opening adjustable value, are reduced by that amount; and (d) if subparagraph (1)(b)(ii) applies to you—you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi‑owner of the plant under the former Act continue. (3) If you were using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis: (a) for the diminishing value method—replace the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate you were using; and (i) replace the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate you were using; and (ii) increase the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note 1: Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced. > Note 2: Small business entities can choose to work out the decline in value of their depreciating assets under Division 328. (a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or (3) If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40‑70(1) or 40‑75(1) of the new Act that includes the plant’s effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and (2) For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets. (3) For a case where the plant is merged into another depreciating asset, section 40‑125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it. (b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and (a) you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and (b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU’s opening adjustable value. (1) Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001. (2) For a unit of software for which you were deducting amounts under Subdivision 46‑B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis: (d) you must use the same effective life you were using under Subdivision 46‑B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001. (1) This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day. (b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and (c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and (1) This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001. > Note: Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8). (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330‑80 of the former Act for your income year ending on 30 June 2001; and (c) in applying the formula in section 40‑75 of the new Act for the income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The remaining effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these: (i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and (ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (7) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and (b) the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of expenditure incurred in carrying on eligible quarrying operations—the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (i) you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day) after 30 June 2001; or (ii) the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day) after 30 June 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which the start day occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year. there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (1) This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330‑H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and (c) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (i) any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset); (i) any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (4) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (4) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (b) the expenditure would have been transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330‑H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for your income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (1) Despite subsections 40‑35(5), 40‑38(5) and 40‑40(4), there is no additional decline in the value of the notional asset referred to in those subsections if: (a) apart from this section, subsection 40‑35(5), 40‑38(5) or 40‑40(4) would apply because the real asset referred to in that subsection is disposed of; and (a) at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373‑35 of the former Act; and (b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day. (a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and (1) Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time). (2) Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time. (a) you have deducted or can deduct an amount under Subdivision 387‑G of the former Act for an amount (the qualifying amount) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and (b) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and (1) This section applies to you if you have deducted or can deduct an amount under Subdivision 400‑A of the former Act for an amount (the qualifying amount) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400‑A of the former Act. (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and (c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400‑15(3) of the former Act; and (1) Units of plant that you had allocated to a pool under Subdivision 42‑L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act. (a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and (c) in applying the formula in section 40‑70 of the new Act for your income year in which 1 July 2001 occurs—it has a base value equal to that opening adjustable value; and (d) you replace the component in the formula in subsection 40‑70(1) of the new Act that includes an asset’s effective life with the pool percentage you were using for the pool; and (e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40‑115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and (f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset. (3) An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item). > Note 1: You work out the decline in value of an item removed under this subsection under Subdivision 40‑B of the new Act, using the cost for it worked out under section 40‑205 of the new Act. (b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset. (2) The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year) in this way: (a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and (b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section. (a) for a unit of plant (including IRUs and expenditure on software that is not pooled)—its undeducted cost at the end of 30 June 2001; or (b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence—the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or (c) for transport capital expenditure—the entity’s amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or (d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (e) for expenditure on evaluating the impact on the environment of a project—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (f) for assets that were pooled under Subdivision 42‑M or 42‑L of the former Act—the closing balance of the pool at the end of 30 June 2001. (4) The asset’s base value for applying the formula in section 40‑70 of the new Act for the diminishing value method is that opening adjustable value. (5) The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an item of plant for which you were using the prime cost method—using the rules in section 40‑10 of this Act; and (c) for a unit of software for which the entity was deducting amounts under Subdivision 46‑B of the former Act—using the rules in subsection 40‑25(2) of this Act; and (f) for an amount of expenditure on evaluating the impact on the environment of a project—using the rules in section 40‑55 of this Act. (6) The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an amount of unrecouped expenditure under Division 330 of the former Act—using the rules in section 40‑35 of this Act; and (b) for an amount of transport capital expenditure under Division 330 of the former Act—using the rules in section 40‑40 of this Act; and (7) The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act. (a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑C of the former Act; or (b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑H of the former Act; or (c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387‑B of the former Act; or (d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; or (e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365. (9) The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001. (10) You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount). (11) You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount. (1) Subsections 40‑65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened: (b) you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act. (a) paragraph 40‑65(6)(a) of the Income Tax Assessment Act 1997 included both events set out in subsection (1) of this section; and (b) subsections 40‑65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events. (1) A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936. (2) An amount you have deducted or can deduct for a water facility under Subdivision 387‑B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40‑F of the new Act. (3) A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936. (a) you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40‑115 (about splitting a depreciating asset) or 40‑125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and (b) it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40‑72 of that Act; (2) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if: (c) it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40‑72 of that Act. (3) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset) before 10 May 2006 if: (b) the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and (d) it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40‑72 of that Act. (a) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you: (b) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001. (2) If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act. (3) Otherwise, Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section. (a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or (b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or (ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life. (1) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001. > Note: If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40\. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997. (1A) Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001. (1B) Subsection (1) applies to a mining, quarrying or prospecting right (the new right) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if: (i) the other company is a member of the same wholly‑owned group as the original holder and was a member of that group just before that day; and (ii) the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer. (1D) Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if: (b) the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001. (a) you acquired, under an interest realignment arrangement, an interest (a new interest) in a mining, quarrying or prospecting right; and (b) the interest was acquired in exchange for one or more other interests (old interests) in other mining, quarrying or prospecting rights; and Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001. (a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or (b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership; the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act. (3) An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that: (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act. (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act. (6) Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243. (7) An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if: (a) you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and (8) The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section. (c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act. (2) Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001. A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act. if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011. (2) The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011. (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset for an income year is the amount worked out under section 40‑130 if: (a) the income year is the year in which you start to use the asset, or have it installed ready for use, for a taxable purpose; and (b) subsection (2) (about businesses with turnover less than $500 million) applies to you for the year and for the income year in which you started to hold the asset (if that was an earlier year); and > Note 1: An effect of paragraph (1)(a) is that this Subdivision only applies to one income year per asset. See also subsection 40‑135(1). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $500 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. Exception—assets for which the decline in value is worked out under section 40‑82 or Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (3) However, this section does not apply to a depreciating asset for an income year if you work out the decline in value of the asset for the income year under any of the following: (1) For the purposes of paragraph 40‑120(1)(c) and section 328‑182, you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you: > Note: Section 328‑182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997. (i) entering into a contract under which you hold the post‑12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑12 March 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post‑12 March 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (8) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (9) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (10) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (1) For the purposes of section 40‑120, the decline in value for the income year in which paragraph 40‑120(1)(a) is satisfied (the current year) is: > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 12 March 2020 to 30 June 2020 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2020 to 30 June 2021. (a) 50% of the asset’s cost as at the end of the current year, disregarding any amount included in the second element of the asset’s cost after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997, assuming its cost were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (3) However, the amount worked out under subsection (2) for an income year cannot be more than the amount that is the asset’s cost for the year. (a) 50% of the sum of the asset’s opening adjustable value for the current year and any amount included in the second element of its cost for that year, disregarding any amount included in that second element after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997 assuming: (ii) for the prime cost method—the component “Asset’s \*cost” in the formula in subsection 40‑75(1) of that Act (as adjusted under that section) were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (b) for the prime cost method—the sum of its opening adjustable value for the income year and any amount included in the second element of its cost for that year. (1) The decline in value of a depreciating asset is not worked out under this Subdivision for an income year if this Subdivision already applied in working out the decline in value of the asset for an income year. (2) For an income year later than the year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (3) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (4) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) You may choose that the decline in value of a particular depreciating asset for an income year, and subsequent income years, is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the first income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. If this Subdivision applies to work out the decline in value of a depreciating asset you hold for an income year, no other provision of this Act or the Income Tax Assessment Act 1997 applies to work out that decline in value. (1) For the purposes of this Subdivision, you are covered by this section for a depreciating asset if, on or before 30 June 2023: (2) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (3) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or Exception—assets for which the decline in value is worked out under Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (a) the asset is allocated to a low‑value pool, or expenditure on the asset is allocated to a software development pool (see Subdivision 40‑E of the Income Tax Assessment Act 1997); or (b) you or another taxpayer has deducted or can deduct amounts for the asset under Subdivision 40‑F of the Income Tax Assessment Act 1997 (about primary production depreciating assets). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $5 billion; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this section. (ii) if the 2019‑20 income year ends on or before 6 October 2020—the sum of your ordinary income (if any) and statutory income (if any) for the 2019‑20 income year; and (c) the sum of the amounts worked out under subsection (3) for the 2016‑17, 2017‑18 and 2018‑19 income years exceeds $100 million. (b) next, work out the cost of each of those assets (including any amounts included in the second element of the asset’s cost at a time that is in the income year); (4) For the purposes of subsection (3), disregard an asset if, at the time you first used the asset, or had it installed ready for use, for a taxable purpose: (a) it was not reasonable to conclude that you would use the asset principally in Australia for the principal purpose of carrying on a business; or (5) For the purposes of paragraph (3)(b), to work out the cost of a depreciating asset that is capital works (see section 43‑20 of the Income Tax Assessment Act 1997): (a) disregard section 40‑45 of that Act and work out the cost of the capital works using Subdivision 40‑C of that Act; and (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under subsection (3) if: (a) where section 40‑155 covers you for the current year (regardless whether section 40‑157 also covers you for the current year)—an exclusion applies to you and the asset for the current year under section 40‑165 (about exclusions for businesses with turnover of $50 million or more); or (ii) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s start time occurs in the current year—the asset’s cost as at the end of the current year, disregarding any amount included in the asset’s cost after 30 June 2023; or (b) if the asset’s start time occurred in an earlier year—the sum of its opening adjustable value for the current year and any amount included in the second element of its cost for the current year, disregarding any amount included in the asset’s cost after 30 June 2023. > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 6 October 2020 to 30 June 2021 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2021 to 30 June 2022. (a) where paragraph 40‑160(2)(a) applies—section 40‑155 would not cover you for the income year if the reference in that section to $5 billion were instead a reference to $50 million; and (i) entering into a contract under which you hold the post‑6 October 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑6 October 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of satisfying paragraph 40‑160(1)(a) for the post‑6 October 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you already satisfied paragraph 40‑160(1)(a) of this Act for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (9) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (1) For the purposes of subsections 40‑160(2) and 40‑170(1A), an exclusion applies to you and an asset for an income year if any of the exclusions in this section applies in relation to the asset. (4) This exclusion applies in relation to the asset if the asset is available for use, at any time in the income year, by any of the following: (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under this section if: (ii) you started to use the asset, or have it installed ready for use, for a taxable purpose in an earlier income year; and (b) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under section 40‑82 of the Income Tax Assessment Act 1997—the amount worked out under subsection (3); or (b) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under Subdivision 40‑BA of this Act—the amount worked out under subsection (4); or Assets affected by section 40‑82 of the Income Tax Assessment Act 1997 (about assets costing less than $150,000, medium sized businesses) (a) the amount that would be the asset’s decline in value for the year under section 40‑82 of the Income Tax Assessment Act 1997, assuming the reference in subparagraph 40‑82(3A)(b)(ii) of that Act to 31 December 2020 were instead a reference to the 2020 budget time; and (a) the amount that would be worked out under paragraph 40‑130(2)(a) or (4)(a) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(a) and (4)(a) to 30 June 2021 were instead references to the 2020 budget time; and (c) the amount that would be worked out under paragraph 40‑130(2)(b) or (4)(b) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(b) and (4)(b) to “the amount worked out under paragraph (a)” were instead references to “the amounts worked out under paragraphs 40‑170(4)(a) and (b)”. (a) the amount that would be the asset’s decline in value for the year under Division 40 of the Income Tax Assessment Act 1997, disregarding any amounts included in the eligible second element worked out under section 40‑175 of this Act for the asset for the year; and The amount worked out under this section (the eligible second element) for a depreciating asset for an income year is the sum of any amounts included in the second element of the asset’s cost at a time that is in both of the following periods: (1) For an income year later than a year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (2) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (3) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) This section applies if the decline in value for a depreciating asset for an income year is worked out under this Subdivision, and at a time (the balancing adjustment time) in a later income year: (i) it becomes not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (b) none of the requirements in paragraphs 40‑295(1)(a), (b) or (c) of the Income Tax Assessment Act 1997 are satisfied in relation to the asset. (2) For the purposes of Subdivision 40‑D of the Income Tax Assessment Act 1997 assume that, at the balancing adjustment time, you stop using the asset, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again. (3) For the purposes of section 40‑180 of the Income Tax Assessment Act 1997 assume that the reference in item 3 of the table in subsection 40‑180(2) of that Act to “because you stop using it for any purpose expecting never to use it again” were instead a reference to “because of section 40‑185 of the Income Tax (Transitional Provisions) Act 1997”. (4) If a balancing adjustment event happens to a depreciating asset you hold because of this section, this Subdivision cannot apply to work out the decline in value of the asset for a later income year. (1) You may choose that the decline in value of a particular depreciating asset for an income year is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year. (1) Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40. (a) you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset: (ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and (4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day. (5) The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if: (i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or (ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and  > sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose. (7) Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens: (a) if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b). (i) an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and (ii) the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and (3) The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount. (a) on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and (c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and (ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal; (2) There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal. (3) Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount. If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997. (a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and (b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and: (i) the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, the R&D entity is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—a clawback amount under section 355‑447 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑466 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. (b) section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions. > Note 2: The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and: (i) the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset; (ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, an R&D entity (the partner) that is a partner in the R&D partnership and is entitled to one or more new law deductions for one or more income years for the asset, is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—a clawback amount under section 355‑449 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑468 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s new law deductions mentioned in paragraph (2)(b) of this section. (4) Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event. > Note: Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions. (1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant. (b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and (3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it. (a) there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and (b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act. (2) The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor. (3) The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and <table cellspacing="0" cellpadding="0" style="width:364.2pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:353.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading" style="page-break-inside:avoid"><span>Conditions for small business taxpayers retaining accelerated rates</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Condition</span></p></td></tr></thead><tbody><tr><td style="width:21.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:321.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>The transferee must have been a small business taxpayer for the income year (the </span><span style="font-weight:bold; font-style:italic">start year</span><span>) that includes the time when the entity first used the plant, or first had it installed ready for use.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>2</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>At that time, neither of these applies:</span></p><p class="Tablea"><span>(a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;</span></p><p class="Tablea"><span>(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection</span><span> </span><span>(5).</span></p></td></tr></tbody></table> ``` (4) For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership. (5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement. (a) for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or (i) replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and (ii) increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).  (b) if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11). (c) that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and (d) that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and (e) that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity. (a) for taxable supplies (if any) the entity makes during the year in the course of carrying on a business—the value (as defined by section 9‑75 of the GST Act) of the supplies; and (b) for other supplies the entity makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies. (1) The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for: (a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (c) for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or (d) for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant. (3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115. (4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain. (5) Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee. (i) the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or (a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and (1) A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act. (2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year. For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if: Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act. (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset): and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply. (i) for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or (ii) for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and (c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act. (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and (2) Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act. The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under: (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on: (2) You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act. (3) A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under: (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and (2) Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act. A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act. The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001. If: (d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act; (a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and (a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and (b) the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and (c) paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997. Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years. (1) For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section. (b) the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (b) that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (1) There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea" style="page-break-after:avoid"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a); and</span></p><p class="Tablea" style="page-break-after:avoid"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (b) disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (f) an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division. (4) If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45‑5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest. (5) If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45‑10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest. Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Disregard the use of the following amounts in determining (for the purposes of Subdivision 50‑A of the Income Tax Assessment Act 1997 whether a fund established before 1 July 1997 operates and pursues its purposes in Australia: Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years. (2) However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date. Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if: (b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time. Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years. 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years (1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act. <table cellspacing="0" cellpadding="0" style="margin-left:56.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:258.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Application provisions for specific sections</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-size:9pt; font-weight:bold">Item</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">This section of the </span><span style="font-size:9pt; font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-size:9pt; font-weight:bold"> ...</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">Applies as described in this provision of this Act ...</span></p></td></tr></thead><tbody><tr><td style="width:24.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55(1)</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>95</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>8</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td></tr></tbody></table> ``` (a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and (b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997. > Note: Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year. (b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997; sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997). > Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock. (3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997. (a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and (b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936; > Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal. #### 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997. (1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year. (2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936. (3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year: (a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners; (b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed. > Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year. > Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year. (b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year; the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year. (2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. (3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2). #### 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997. #### 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business (1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. (2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity. > Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997. (1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. (2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value. > Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997. #### 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year. (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. > Note: Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. > Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given). (5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act). (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment. > Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%. (5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%. (6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.  > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section. (b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4). Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age. Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later. Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies. Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3. (4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997. (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%. > Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986. (5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D. > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. (a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and (b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year). (3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and (2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual: (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income. > Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F. > Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997. > Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997. #### 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 (1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012. (2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies. (3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act. (b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009. (2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if: (i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest; (iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or (i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest; (iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009. (2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time. (4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2): (a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and (b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being: (ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and (c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and (d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if: (i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or (ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and (e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and (i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and (ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and (g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest. (a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced: (i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or (ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and (b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5. (2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right. (3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right. (2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. (3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section. Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years. (1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision. > Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision). > Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936). > Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997. (a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936. (1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936. (2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997. > Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997. (3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and (d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; (f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time. > Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and (d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015. (a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or (4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if: (b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset. The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year. (a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and (1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied: (b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and (d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works). (3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936. Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936. (b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006. (2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement. > Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement. Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual: (b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her. 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act (1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee). (2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year: (3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection. #### 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997. Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936). (2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if: (a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; (a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011); (b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986. > Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section. If: (a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and (b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936; Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995. (1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997. (2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997. (3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997. (4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997. > Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one. Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year: (a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and (b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year; the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation. Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset. (b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section); > Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply. (1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if: (a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and (2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value. (4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value. (a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997. (2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less. (1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936: (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. (1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if: (2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by: (a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or (a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or (2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period. Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year: If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997. (1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002. (2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset. (3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required. (i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and (ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and (c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and (f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997). (a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or (1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:  > total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part. (a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or (2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section. (3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1). (1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences. > Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997. (c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets). (4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act. (5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act. Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement. (a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and (2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time. (a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and (ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs. (2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer. (a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and (b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest; (2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event. (3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly. (4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly. <table cellspacing="0" cellpadding="0" style="width:362.55pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:351.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Creating a CGT asset</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">CGT event number</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Applicable amount</span></p></td></tr></thead><tbody><tr><td style="width:50.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D1</span></p></td><td style="width:290.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the incidental costs the originating company incurred that relate to the CGT event</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D2</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the option</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D3</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the right</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>F1</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred on the grant, renewal or extension of the lease</span></p></td></tr></tbody></table> ``` (5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day. A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision. (a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996. (b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. (b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend. (3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities. (1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company. (2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred. (3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company. (1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of: (2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of: (3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note. (1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised. (b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and (ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act. You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and (b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996. (c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and (c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over. (3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. (a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and (c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and (d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act. (3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division. Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years. A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: (1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day. (2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice. (a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and (b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and (a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and (b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and (c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group. (5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004. (6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection. (1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss): (b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions); and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time: (i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or (e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and (f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and (ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred; (2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if: (a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these: (i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset; (ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and (3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act. (a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and (b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section. (5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of: (a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and (b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset. Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. (ii) that could have been deducted, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the deduction had not been limited by the company’s income for that income year; and (ii) that could have been applied, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the application of the loss had not been limited by the company’s capital gains for that income year. 170‑C Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred #### 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years. #### 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). #### Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997. Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997. If: (a) all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (d) that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and (e) the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place. Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years. > introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament. Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day. #### Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting #### 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B. (1) The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day. (2) No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted. #### 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting (1) Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if: (a) the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and (b) none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount. (2) No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount. (1) This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account. (2) For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. > Note 2: If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60. (3) For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)). (4) For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. (5) The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if: (a) during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and (b) the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section. (a) the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and (b) during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components. (7) For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. (8) Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it: (b) the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component. (9) Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component. (10) For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002: (b) lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination; (c) a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination); (e) the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination); (f) the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination). Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period: 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows: (a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and (i) in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and (ii) in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. > Note: A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002. #### 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002: (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:23.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:87.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A franking surplus</span></p></td><td style="width:220.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.009.png" width="175" height="58" alt="Start formula Amount of the class A franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.010.png" width="190" height="56" alt="Start formula Amount of the class B franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.011.png" width="190" height="56" alt="Start formula Amount of the class C franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` #### 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus): (a) a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Original surplus</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:85.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>class A</span></p></td><td style="width:220.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.012.png" width="169" height="38" alt="Start formula Amount of the original class A surplus times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.013.png" width="169" height="38" alt="Start formula Amount of the original class B surplus times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.014.png" width="169" height="38" alt="Start formula Amount of the original class C surplus times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (4) If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit): (a) a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company. (5) The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking deficit into 1997 Act franking debit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Original deficit</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking debit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(4)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:70.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A</span></p></td><td style="width:235.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.015.png" width="164" height="38" alt="Start formula Amount of the original class A deficit times start fraction 39 over 61 end fraction end formula "></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.016.png" width="164" height="38" alt="Start formula Amount of the original class B deficit times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.017.png" width="164" height="38" alt="Start formula Amount of the original class C deficit times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (2) A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if: (c) the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions. (3) The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if: (b) the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and (1) While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit. (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year. (3) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: > Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act. (1) The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account. (a) a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time; (3) If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if: (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity. #### 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If: the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time. (1) Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections. (2) If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year. Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year. Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year. (5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in: that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement. (6) The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (7) The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (2) The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (3) The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (i) are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and (a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and (b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section. (a) whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and (1) This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002. (a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and (3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded. (1) This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002; (2) If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (3) If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (4) If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. (5) If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows: (a) any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and (i) in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and (ii) in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. #### 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF.  #### 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act). (2) If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus): (a) a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF. (4) If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit): (a) a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF. This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period). (1) The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period: (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (1) The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period. (2) The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner. (3) The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5. (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and (d) the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner; the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received. (3) A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time: (1) A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends. (2) However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period. (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (a) the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed: (d) the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and (e) the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return. (2) The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day. (1) The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period. (2) The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made. Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period. (b) on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax); the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed: (c) the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and (d) the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return. (2) The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day. The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period: If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day. If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and If: (a) a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and (b) the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment; In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment. If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment. The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with. If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953. (1) Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period. (a) the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and (b) the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3); the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on: (c) if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or If: Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax. Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division. If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997. (a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day: (3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002. (a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002: > Note: As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date. (b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997. In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003. (1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year. (a) a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of: (i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time; (iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period; (2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if: (b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time: (ii) the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. > Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. > Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. (7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table: <table cellspacing="0" cellpadding="0" style="width:365.35pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount of the franking credit and the exempting debit</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">If:</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the credit and debit is:</span></p></td></tr></thead><tbody><tr><td style="width:22.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The period starts immediately after 7.30</span><span> </span><span>pm by legal time in the Australian Capital Territory on 13</span><span> </span><span>May 1997</span></p></td><td style="width:141.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Both these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was not in surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>All these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was in surplus at the start of the period;</span></p><p class="Tablea"><span>(c) the surplus in the account at the switch time is greater than the surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the franking surplus in the Australian company’s franking account at the switch time; and</span></p><p class="Tablea"><span>(b) the franking surplus in the Australian company’s franking account at the start of the period</span></p></td></tr></tbody></table> ``` (a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and (b) the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period. Subdivision 235‑I of the Income Tax Assessment Act 1997 applies to assets acquired by the trustee of an instalment trust in: (1) Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years. (2) However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time). (3) The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997. Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997. (2) Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in: (1) Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that: (b) is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose. (a) if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007. > Note: To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997. (b) contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option; the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option. (3) For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5). (4) If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is: (a) the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less (b) the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest. (5) If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is: (6) If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil. (1) If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one. (2) If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year. (3) If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year. (a) for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and (b) for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year: Step 1. Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. Step 2. Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3). Step 3. If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year. > Note: Example: Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75): (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred: (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times: (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate. Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008. (a) the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and (b) the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities: (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (i) the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or (ii) the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and (f) none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made: (i) Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event; (ii) a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year. (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (b) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (c) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year #### 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year (a) the requirements set out in paragraphs 275‑610(1)(a), (b) and (c) of the Income Tax Assessment Act 1997 are satisfied in respect of an amount of non‑arm’s length income of a managed investment trust in relation to an income year; and (b) the managed investment trust became a party to the scheme mentioned in paragraph 275‑610(1)(a) of that Act before the day on which the Bill that became the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 was introduced into the House of Representatives; and Division 276 of the Income Tax Assessment Act 1997 as inserted in that Act by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (the amending Act) applies as set out in subitem 1(1) of Schedule 8 to the amending Act. (b) if the trustee of the trust has made a choice for the purposes of paragraph 1(1)(b) of Schedule 8 to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016—the first income year starting on or after 1 July 2015; or (c) if the trustee of the trust has made a choice for the purposes of subparagraph 276‑10(1)(e)(i) of the Income Tax Assessment Act 1997 in respect of the 2016‑17 income year—that income year. (c) the trust is an AMIT for an income year (the discovery year) that is the starting income year or a later income year. (1) This section applies if the trust has an under or over of a character in the discovery year relating to the base year. (b) if, at a time, the trust sent its members distribution statements for an income year that is prior to the starting income year—assume that the trust sent those members AMMA statements for that income year at that time. (3) For the purposes of Division 276 of the Income Tax Assessment Act 1997, treat the under or over mentioned in subsection (1) as an under or over of the AMIT, in the discovery year relating to the base year, of the character mentioned in that subsection. (a) had the under or over mentioned in subsection (1) been discovered before the starting income year, this Act would have operated to produce a particular effect (the pre‑AMIT scheme effect) for the base year in relation to the amount or amounts reflected in the under or over; and 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT #### 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT (b) working out the amount (if any) of the entity’s capital gain under subsection 104‑70(4) of the Income Tax Assessment Act 1997. (3) For the purpose of working out the amount of the non‑assessable part mentioned in paragraph 104‑70(1)(b), treat the following provisions as being in operation at the time the payment was made: (b) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in paragraph (a). (4) Subsection (3) does not apply to the extent (if any) that the entity, in the income tax return that it lodged for the income year in which the payment was made, included the amount of the payment in its assessable income for that income year. (5) For the purposes of section 118‑20 of the Income Tax Assessment Act 1997, treat this section as being in Part 3‑1 of that Act. (2) The Commissioner cannot amend the entity’s assessment for the income year in which the payment was made in a particular way if: (b) the Commissioner could not amend the assessment in that way if the following provisions were in operation at the time the payment was made: (ii) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in subparagraph (i); and Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82‑10F). (2) The object of this section is to apply (with modifications) provisions limiting deductibility in respect of certain contributions made during the period that: (a) Subdivisions AA and AB of Division 3 of Part III of the Income Tax Assessment Act 1936, as in force just before they were repealed by the Superannuation Legislation Amendment (Simplification) Act 2007; (b) any other provision of the Income Tax Assessment Act 1936, or of any instrument made under that Act, to the extent that it relates to the operation of those Subdivisions; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of those Subdivisions. (b) the deduction limit mentioned in section 82AAC for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (c) the deduction limit mentioned in section 82AAT for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (d) Division 290 of the Income Tax Assessment Act 1997 did not apply to contributions made during the income year mentioned in paragraph (a). (2) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of a defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection and subsection (4), the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 5 September 2006; (b) the defined benefit interest mentioned in paragraph (2)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 5 September 2006, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (2)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (4) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of the defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection, the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 12 May 2009; (b) the defined benefit interest mentioned in paragraph (4)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 12 May 2009, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (4)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (1) The object of this section is to apply (with modifications) provisions relating to excess non‑concessional contributions tax in respect of certain contributions made during the period that: (b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision. (ea) in a case where paragraph 292‑95(1)(b) of that Act would have allowed the contribution mentioned in that paragraph to be made at a time within that period—that paragraph allowed the contribution to be made on or before 30 June 2007; and (f) paragraph 292‑95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and (fa) in a case where subsection 292‑100(2), (4), (7) or (8) of that Act would have allowed the contribution mentioned in that subsection to be made at a time within that period—that subsection allowed the contribution to be made on or before 30 June 2007; and (g) paragraph 292‑100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and (h) contributions made during that period that are covered under section 292‑100 of that Act reduce the person’s CGT cap amount for the 2007‑2008 financial year in accordance with subsection 292‑105(2) of that Act (and despite subsection (1) of that section); and (i) if the conditions in subsection (4) are satisfied—the person’s excess non‑concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and (b) the Commissioner gives the person a transitional release authority under subsection 292‑80A(2) in response to the application; and (c) the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292‑80B within 21 days after the date of the release authority; and (d) the superannuation provider pays the person the amount required under section 292‑80C in relation to the transitional release authority. (b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act). (6) The amount to be included in the first person’s amount of non‑concessional contributions under subparagraph (3)(b)(ii) is the sum of: (a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and (b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made. (c) under Division 295 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)), the contribution is included in the assessable income of the superannuation provider in relation to the superannuation plan to which the contribution is made; and (8) For the purposes of paragraph (7)(b), treat the person as an employee of the other entity if the person would be treated as an employee of the other entity under Division 290 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)). (1) A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007. (2) The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292‑80(3)(b)(i), the person would have excess non‑concessional contributions for the financial year mentioned in paragraph 292‑80(3)(a). (4) For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out: The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 21 days after the date of the release authority. (1) A superannuation provider that has been given a transitional release authority in accordance with section 292‑80B must pay to the person within 30 days after receiving the release authority the least of the following amounts: (a) if the person requests the provider in writing to pay a specified amount in relation to the release authority—that amount; (c) the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person in complying superannuation plans. > Note 1: Section 288‑95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection. > Note 2: Section 288‑100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority. > Note 3: For reporting obligations on the superannuation provider in these circumstances, see section 390‑65 in Schedule 1 to the Taxation Administration Act 1953. (2) The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person in complying superannuation plans. (3) Section 307‑125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section. (a) your non‑concessional contributions cap for the 2015‑2016 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsection 292‑85(7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 applies after the commencement of this section as if: (d) subsection 292‑85(6) of that Act as so amended had been applied (taking into account paragraph (c) of this subsection) for the purposes of working out your non‑concessional contributions cap for the 2016‑2017 financial year. (2) For the purposes of working out your non‑concessional contributions caps for the 2017‑2018 financial year and the 2018‑2019 financial year, if: (a) your non‑concessional contributions cap for the 2016‑2017 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsections 292‑85(6) and (7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 apply after the commencement of this section as if the amount worked out under subsection 292‑85(5) of that Act as so amended were $380,000. (3) To avoid doubt, this section does not affect your non‑concessional contributions cap for any financial year that ended before 1 July 2017. The tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your non‑concessional contributions (see section 292‑90 of the Income Tax Assessment Act 1997) for the financial year. (2) Subject to section 294‑55, the amendments of Division 294 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Treasury Laws Amendment (2017 Measures No. 2) Act 2017 apply on and after 1 July 2017. Despite sections 294‑30 and 294‑140 of the Income Tax Assessment Act 1997 (which are about when you have excess transfer balance), you do not have excess transfer balance in your transfer balance account on any day in the period of 6 months beginning on 1 July 2017 if: (a) the only transfer balance credits in the account in that period arose under item 1 of the table in subsection 294‑25(1) of that Act (which is about superannuation income streams you have just before 1 July 2017); and (b) the sum of those transfer balance credits exceeds your transfer balance cap, but is less than or equal to $1,700,000; and (c) at the end of the period, the sum of all the transfer balance debits arising in your transfer balance account equals or exceeds the amount of the excess from paragraph (b). (1) Despite subsection 294‑10(2), a transfer balance credit arises under item 4 of the table in subsection 294‑25(1) of the Income Tax Assessment Act 1997 only in relation to a borrowing that arises under a contract entered into on or after 1 July 2017. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2017 is treated as if it arose under a contract entered into before 1 July 2017 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) on 1 July 2017, a transfer balance debit arose in your transfer balance account under item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997; and (b) the sum of all the transfer balance credits that arise in your transfer balance account under item 1 of the table in subsection 294‑25(1) of that Act exceeds the amount that would, apart from this section, be the amount of that debit. (2) Despite column 2 of item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997, the amount of the transfer balance debit is instead equal to the sum worked out under paragraph (1)(b) of this section. 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain > The object of this Subdivision is to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the following legislative changes: (a) the introduction of a transfer balance cap (as a result of Schedule 1 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016); (b) the exclusion of transition to retirement income streams (and similar income streams) from being superannuation income streams in the retirement phase (as a result of Schedule 8 to that Act). (a) starting on the start of the day on which the Bill that became the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 was introduced into the House of Representatives; and (a) at the start of the pre‑commencement period, a CGT asset of a fund is a segregated current pension asset of the fund; and (i) at a time (the cessation time) in the pre‑commencement period, the asset ceases to be a segregated current pension asset of the fund; or (ii) at the start of 1 July 2017 (also the cessation time), the asset ceases to be a segregated current pension asset of the fund because it supports a superannuation income stream covered by subsection 307‑80(3) of the Income Tax Assessment Act 1997; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (b) the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year is greater than nil; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and #### 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑115(3)(a), the fund makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the fund’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Subsection 295‑390(1) of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). > 2016‑17 non‑exempt proportion means 1 minus the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year. #### 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset (i) the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997 in respect of the trust for the 2016‑17 income year; (ii) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year; and (d) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and #### 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑125(3)(a), the trust makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the trust’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Section 295‑400 of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). (a) unless paragraph (b) applies—1 minus the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997; or (b) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage worked out by subtracting the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year from 100%. This Subdivision applies to an entity that is the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust. For the purposes of this Subdivision, an asset is a 30 June 1988 asset of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust if the entity owned it at the end of 30 June 1988. > Note: Section 295‑90 of the Income Tax Assessment Act 1997 treats these assets as having been acquired on 30 June 1988. (1) The first element of the cost base of each 30 June 1988 asset of the entity’s is the greater of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). (2) The first element of the reduced cost base of each 30 June 1988 asset of the entity’s is the lesser of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). the market value of the asset as at the end of 30 June 1988 is the average of the highest and lowest trade prices for identical assets recorded on 30 June 1988 in whichever of the following markets is applicable: (d) if, on that date, there was a State capital city market (other than the Sydney market) that recorded a higher volume of trading than the Sydney market in identical assets—that State capital city market; (2) For the purposes of this section, an asset is taken to have been listed on an Australian stock exchange on 30 June 1988 if, and only if, on that day the asset had the status of having been granted official quotation by a securities exchange within the meaning of the former Securities Industry Act 1980 or the law of a State or Territory corresponding to that former Act. (b) at any time during the period commencing at the time when the shares were acquired and ending at the end of 30 June 1988, the company paid an amount that was not a dividend to the entity in respect of the shares; (b) at any time during the period commencing at the time when the interest or unit was acquired and ending at the end of 30 June 1988, the trustee of the trust paid an amount to the entity in respect of the interest or unit, being: (i) in a case where the entity was exempt from tax for the year of income in which the payment was made—an amount that, if the entity had not been exempt from tax, would not have been the entity’s assessable income; or the cost base to the entity of the interest or unit as at 30 June 1988 is reduced by so much of the amount as is not attributable to a deduction allowed under former Division 10C or 10D of the Income Tax Assessment Act 1936. (1) Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (2) and (3) of this section apply if an entity exercises rights or options as mentioned in that section to acquire: (b) the greater of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (b) the lesser of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (4) The payment referred to in subsection (2) or (3) can include giving property. To the extent that the payment does, use the market value of the property in working out the amount of the payment. (1) A notice given under subsection 82AAT(1A) or (1CB) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑170 of the Income Tax Assessment Act 1997. (2) A notice given under subsection 82AAT(1C) or (1CD) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑180 of the Income Tax Assessment Act 1997. (1) A proportion of the ordinary income and statutory income of a continuously complying fixed interest ADF of an income year that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).  > Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the income year. > Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the income year. (4) A choice for the purposes of the definition of reckoning time in subsection (5) must be made on or before the date of lodgment of the income tax return of the ADF for the income year to which the choice relates, or before a later day allowed by the Commissioner. > continuously complying fixed interest ADF, in relation to an income year (the current year), means a fund that is a fixed interest complying ADF in relation to each of the following years: > current 25 May balance, in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time: (b) subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 September 1989 is to be added to the balance; (b) a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that day, made a deposit with the ADF that consisted wholly or partly of the roll‑over (as defined in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 as in force on that day) of an eligible termination payment as so defined, being an eligible termination payment that included a concessional component (as so defined). > fixed interest complying ADF, in relation to a year of income, means a complying ADF where both of the following conditions are satisfied: (a) not less than 90% of the amount that, apart from this section, would be the assessable income of the ADF of the income year (other than non‑arm’s length income or amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997) consists of any one or more of the following: (ii) any profit arising on the disposal, redemption, cancellation or maturity of a CGT asset referred to in paragraph 295‑85(3)(b) of the Income Tax Assessment Act 1997; (iii) an amount included in assessable income under Division 16E of Part III of the Income Tax Assessment Act 1936 (or would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply); (ii) virtual PST life insurance policies (as defined in the Income Tax Assessment Act 1997) issued by a life insurance company. > original 25 May balance, in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988. > reckoning time, in relation to an ADF in relation to an income year, means the beginning of the income year, or such other time during the income year as the ADF chooses in accordance with subsection (4). (6) This section does not apply to an ADF in relation to an income year unless the whole of the benefit that would accrue to the ADF from the application of this section in relation to the income year has been, or can reasonably expected to be, passed on to eligible depositors. An election made by the trustee of a complying superannuation fund under subsection 279(4) of the Income Tax Assessment Act 1936 that had effect for the income year of the fund in which 30 June 2007 occurs continues to have effect as if it had been made under section 295‑465 of the Income Tax Assessment Act 1997. Subdivisions 295‑I (no‑TFN contributions) and 295‑J (Tax offset for no‑TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006‑2007 income year ends on a day (the end day) after 1 July 2007 as if: (b) the entity’s no‑TFN contributions income for the entity’s 2007‑2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007‑2008 income year if the contributions concerned had been made in the entity’s 2007‑2008 income year. (2) Division 301 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section because you are a member of the fund in the same way as it would apply if the payments were superannuation member benefits paid to you from a complying superannuation fund. For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. Subdivision 301‑F of the Income Tax Assessment Act 1997 applies in relation to income years starting on or after 1 July 2007. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to the following in respect of an income year that starts on or before 1 July 2021: (b) the amendments of the Income Tax Assessment (1997 Act) Regulations 2021 made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023. (a) a superannuation benefit (the trigger benefit) was paid to a person in the 2020‑21 income year or an earlier income year; and (c) the trigger benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; and (2) The Commissioner cannot amend an assessment on the basis that a superannuation benefit paid to the person is a superannuation income stream benefit because of the amendments made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 if: (iii) the superannuation benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (a) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (b) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. (1) The Minister may, by legislative instrument, make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions) that: (a) relate to the amendments or repeals made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023; and (2) Without limiting subsection (1), rules made under this section before the end of the period of 12 months starting on the day that Schedule commences may provide that provisions of that Schedule, or any other Act or instrument, have effect with any modifications prescribed by the rules. Those provisions then have effect as if they were so modified. (2) Division 302 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section after another person’s death, because the other person was a member of that fund, in the same way as it would apply if the payments were superannuation death benefits paid to you from a complying superannuation fund. For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if: (b) just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. (2) For the purposes of Subdivision 82‑B of Division 82, Division 302 and section 303‑5 of the Income Tax Assessment Act 1997, the definition of death benefits dependant in section 302‑195 of that Act applies as if paragraphs (a) and (b) of the definition were replaced with the following paragraphs: (a) a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008 or a person who was formerly such a spouse; or (b) a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008, who is aged less than 18. (ii) a superannuation guarantee payment, a small superannuation account payment, an unclaimed money payment, a superannuation co‑contribution benefit payment or a superannuation annuity payment. (2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you at a time in the period: (i) a condition of release specified in item 107A or 207AA of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; or (ii) a condition of release specified in item 109AA of the table in Schedule 2 to the Retirement Savings Accounts Regulations 1997. (1) This section applies to a superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with section 292‑80B. (2) The superannuation benefit is not assessable income and is not exempt income to the extent that it does not exceed the amount mentioned in subsection (3). (3) The amount is the amount of excess non‑concessional contributions stated in the release authority in accordance with paragraph 292‑80A(3)(a), reduced (but not below zero) by the amount of any superannuation benefit that was not assessable income and not exempt income under a previous operation of subsection (2) in relation to the release authority. (4) The superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3). (a) you have an interest in a FIF (within the meaning of Part XI of the Income Tax Assessment Act 1936, as in force just before the commencement of item 37 of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010) (the paying fund); and (b) Subdivision 305‑B of the Income Tax Assessment Act 1997 applies in relation to the paying fund (see section 305‑55 of that Act); and (c) the paying fund transfers an amount to a complying superannuation fund in respect of you during the deduction year; and (d) you choose under section 305‑80 of the Income Tax Assessment Act 1997 that the amount, or part of the amount, is to be treated as assessable income of the complying superannuation fund; and (e) immediately before the transfer happens, there is a post‑FIF abolition surplus (within the meaning of the Income Tax Assessment Act 1936) for the paying fund in relation to you; and For the purposes of the definition of specified roll‑over amount in the Income Tax Assessment Act 1997, treat the taxable component of a directed termination payment (within the meaning of section 82‑10F) as the element untaxed in the fund of a superannuation benefit that is a roll‑over superannuation benefit. (1) This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007. > Note: This section also applies to an income stream replacing an earlier one because of an involuntary roll‑over (see section 307‑127). (2) Despite subsection 307‑125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows: (a) first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007); (b) next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits. The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit. (3) Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened: (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day; (ba) the holder of the superannuation interest is aged 60 or above on 1 July 2007, if none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day. (a) treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and (b) work out the tax free component of the superannuation interest for the purposes of section 307‑125 of the Income Tax Assessment Act 1997 under subsections (6) and (6A). (i) an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and (ii) the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time; (b) next, work out the unused undeducted purchase price (within the meaning of paragraph (a) of the definition of that term in subsection 27A(1) of the Income Tax Assessment Act 1936 just before the commencement of this section, and disregarding paragraphs (b) and (c) of that definition) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007; (c) next, work out the pre‑July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this section) of the eligible termination payment. (a) at least one superannuation income stream benefit was paid from the superannuation income stream before 1 July 1994; or (b) section 27AAAA of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007) applied to the superannuation income stream just before 1 July 2007; (7) For the purposes of paragraph (6)(c), disregard the value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment. (8) If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as: (b) if 1 or more other events mentioned in subsection (3) happened before the commutation—the time just before the earliest of those events happens. (a) references in that section to the later income stream (in relation to a time, or event happening, before the payment of that involuntary roll‑over superannuation benefit) include references to the earlier income stream; and (b) references in that section to the superannuation interest supporting the later income stream (in relation to a time, or event happening, before the payment of that benefit) include references to the earlier interest. (1) This section applies for the purposes of working out the amount of your total superannuation balance just before 1 July 2017. (2) The transfer balance mentioned in paragraph 307‑230(1)(b) of the Income Tax Assessment Act 1997 just before 1 July 2017 is taken to be equal to: (a) the sum of the transfer balance credits (if any) in your transfer balance account just after the start of 1 July 2017; less (b) the sum of the transfer balance debits (if any) arising in your transfer balance account on 1 July 2017 under item 4 of the table in subsection 294‑80(1) of that Act (about payment splits). (1) Section 307‑231 of the Income Tax Assessment Act 1997 applies in relation to borrowings that arise under contracts entered into on or after 1 July 2018. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2018 is treated as if it arose under a contract entered into before 1 July 2018 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) treat a deduction made under former section 279 of the Income Tax Assessment Act 1936 as having been made under section 295‑465 of the Income Tax Assessment Act 1997 instead; and (b) treat a deduction made under former section 279B of the Income Tax Assessment Act 1936 as having been made under section 295‑470 of the Income Tax Assessment Act 1997 instead. If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007‑2008 income year is, despite subsection 307‑345(1), the total of: (b) the amount by which $140,000 exceeds the upper limit for the 2006‑2007 income year (worked out under section 159SG of that Act). Division 316 of the Income Tax Assessment Act 1997 applies in relation to demutualisations occurring on or after 1 July 2008. If: (a) any assets held by the benefit funds of a life insurance company that is a friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a complying superannuation fund; and (b) the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer; the transfer is disregarded for any purposes of the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936. (1) In working out the amount that a life insurance company can deduct, in respect of life insurance policies that are disability policies (other than continuous disability policies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income. (2) In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection (1) applies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company’s liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320‑85(4) of that Act. If: (2) If the life insurance company wishes to include a part of an approved asset in its virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑87(2) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society establishes a virtual PST in the 2000‑01 income year, the calculation of the transfer values of the company’s virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year. (1) Subsection (3) applies for the purposes of subparagraph (b)(i) of the definition of virtual PST life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 259 of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007. (2) Subsection (3) also applies for the purposes of subparagraph (b)(i) of the definition of complying superannuation/FHSA life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 47 of Schedule 7 to the First Home Saver Accounts (Consequential Amendments) Act 2008. (3) Treat an annuity as having been purchased out of a superannuation lump sum or an employment termination payment, if the annuity was purchased: (b) out of an eligible termination payment (within the meaning of the Income Tax Assessment Act 1997, as in force just before the commencement mentioned in subsection (1) of this section). (2) If the life insurance company wishes to include a part of an approved asset in its segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (a) a life insurance company had a liability before 1 July 2000 under a life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and (c) there is a transfer of the company’s assets to the segregated exempt assets to meet that liability or that part of the liability; (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑105(1) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320‑225 of the Income Tax Assessment Act 1997 in the 2000‑01 income year, the calculation of the transfer values of the company’s segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year. Section 322‑25 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Part VC of the Insurance Act 1973 after 17 October 2008. 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you > new Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force after the commencement of this section. > old Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. > STS taxpayer means an STS taxpayer within the meaning of Division 328 of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. #### 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years (1) This section applies for the purpose of working out whether you are a small business entity (other than because of subsection 328‑110(4) of the Income Tax Assessment Act 1997) for the 2007‑08 or 2008‑09 income year. (2) You work out your aggregated turnover for the 2005‑06 or 2006‑07 income year as if the amendments made by Schedule 1 to the Tax Laws Amendment (Small Business) Act 2007 had been in force in relation to that year. (a) your aggregated turnover for the 2005‑06 income year (worked out in accordance with subsection (2)) is $2 million or more; but (b) your STS group turnover for that year (worked out under Subdivision 328‑F of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section) is less than $2 million. (2) The following provisions apply as if you are a small business entity for the income year in which you are winding up the business: #### 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you (1) For the purpose of working out whether you are a small business entity for the 2007‑08, 2008‑09, 2009‑10 or 2010‑11 income year (each a relevant income year) for the purposes of a provision to which subsection (3) applies: (2) An entity (the first entity) controls a discretionary trust for a relevant income year if, for any of the 4 income years (a previous income year) before that year: (a) if the previous income year is before the 2007‑08 income year—the trustee of the trust made a distribution of $100,000 or more to the first entity, any of its affiliates, or the first entity and any of its affiliates; or (i) the trustee of the trust paid to, or applied for the benefit of, the first entity, any of the first entity’s affiliates, or the first entity and any of its affiliates, any of the income or capital of the trust; and (ii) the percentage (the control percentage) of the income or capital paid or applied is at least 40% of the total amount of income or capital paid or applied by the trustee for that year. (1) This section sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (2) This section also sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (3) Any ordinary income that, apart from paragraph 328‑105(1)(a) of the Income Tax Assessment Act 1997 (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have derived before the changeover year (while you were using the STS accounting method) and you have not included in your assessable income because you have not received it is included in your assessable income for the changeover year. (4) Any general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, that, apart from paragraph 328‑105(1)(b) of that Act (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have incurred before the changeover year (while you were using the STS accounting method) and that you have not deducted because you have not paid them can be deducted for the changeover year. (b) for any later income year for which you are a small business entity but only if you used the STS accounting method for the income year before that later year. > Note: Example: You are a small business entity for the 2007‑08 and 2008‑09 income years and you continue to use the STS accounting method for those years. You are not a small business entity for the 2009‑10 income year so you cannot continue to use the STS accounting method for that year. Because you cannot use the STS accounting method for the 2009‑10 income year, you will not be able to use it again for a later income year even if you are a small business entity for that later year. In sections 328‑115 and 328‑120, STS accounting method means the accounting method that was required by the Income Tax Assessment Act 1997 to be used by STS taxpayers for the 2004‑05 income year. (b) you made a choice under subsection 328‑175(3) of old Subdivision 328‑D in relation to a depreciating asset you use to carry on a primary production business and for which you could deduct amounts under Subdivision 40‑F or 40‑G of the Income Tax Assessment Act 1997. (2) In determining whether you can choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997 in an increased access year, disregard subsection 328‑175(10) of that Act. (3) In applying paragraph 328‑175(10)(b) of that Act for the purpose of determining whether you can choose to use that Subdivision in any income year after the increased access years, disregard: (4) Paragraph 328‑180(1)(b) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that paragraph to $1,000: (i) first used the asset, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (i) first used the asset, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (i) first used the asset, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, on or after 1 July 2023 and on or before 30 June 2026. (a) a reference in that paragraph to the end of the income year in which you start to use the asset, or have it installed ready for use, for a taxable purpose were a reference to the earlier of: if: (i) first used the asset, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021. (5) Paragraph 328‑180(2)(a) or (3)(a) of the Income Tax Assessment Act 1997 applies to an amount included in the second element of the cost of an asset as if a reference in that paragraph to $1,000: (5A) For the purposes of determining whether, under subsection 328‑180(2) of the Income Tax Assessment Act 1997, you can deduct, for an income year (the current year), the taxable purpose proportion of an amount included in the second element of the cost of an asset, disregard paragraph (b) of that subsection if: (2) For the purposes of determining whether subsection 328‑180(1) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (b) of that subsection (which sets a limit of $1,000 on the cost of the asset) if, in the period beginning at the 2020 budget time and ending on 30 June 2023, you: (3) For the purposes of determining whether subsection 328‑180(2) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (a) of that subsection (which sets a limit of $1,000 on the amount) if the amount is included in the second element of the cost of the asset at any time in the period beginning at the 2020 budget time and ending on 30 June 2023. (4) In applying paragraph 328‑180(3)(a) of the Income Tax Assessment Act 1997 to an asset, disregard an amount included in the second element of the cost of the asset if the amount is deducted under subsection 328‑180(2) of that Act, as modified by subsection (3) of this section. (5) Section 328‑210 of the Income Tax Assessment Act 1997 applies as if the words “less than $1,000 but” in subsection (1) were disregarded, in relation to a deduction for an income year that ends: Subsection 328‑190(2) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that subsection to 15% were a reference to 57.5% if you are covered by section 40‑125 for the asset (which is about backing business investment). (1) A depreciating asset of yours that had been allocated to your general STS pool is treated as being allocated to your general small business pool. (2) A depreciating asset of yours that had been allocated to your long life STS pool is treated as being allocated to your long life small business pool. (3) If you made a choice, under subsection 328‑185(5) of old Subdivision 328‑D, not to have a depreciating asset allocated to your long life STS pool, the choice has effect for the purposes of subsection 328‑185(5) of new Subdivision 328‑D. (1) This section applies if a depreciating asset of yours is treated as being allocated to your general small business pool or long life small business pool under section 328‑185. (2) The opening pool balance of your general small business pool or long life small business pool for the 2007‑08 income year is taken to be the closing pool balance of your general STS pool or long life STS pool, as the case requires, for the 2006‑07 income year, reduced or increased by any adjustment required under section 328‑225 of new Subdivision 328‑D (about change in the business use of an asset). (a) you were not an STS taxpayer for the 2006‑07 income year (because you stopped being an STS taxpayer before that time); but (b) you are a small business entity for the 2007‑08 income year or a later income year and you choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets for that income year; the opening pool balance of your general small business pool or long life small business pool includes the sum of the taxable purpose proportions of the adjustable values of depreciating assets allocated to the pool under subsection 328‑185(3) of new Subdivision 328‑D for that year. (1) This section applies for the purposes of applying Subdivision 328‑D of the Income Tax Assessment Act 1997 for the 2012‑13 income year and later income years. (2) A depreciating asset that had been allocated to your long life small business pool is treated as being allocated to your general small business pool. (a) the closing pool balance of your general small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under section 328‑225 of that Act; and (b) the closing pool balance of your long life small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under that section. (1) This section applies if you chose to stop being an STS taxpayer for the 2005‑06 income year or the 2006‑07 income year. (2) You cannot choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets until at least 5 years after the income year for which you chose to stop being an STS taxpayer. > Note: Subdivision 328‑D of the Income Tax Assessment Act 1997 continues to apply to depreciating assets that have been allocated to your small business pools even if you are not a small business entity, or do not choose to use that Subdivision, for an income year: see section 328‑220 of that Subdivision. (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct 20% of particular expenditure for your 2023‑24 income year if: (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (d) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑450 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (6) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (ii) if the provider is a registered body of a kind listed in paragraph (2)(b), (c) or (d)—the training is within the provider’s scope of registration for that kind of registered body; and (d) each enrolment, or arrangement, for the provision of the training is made or entered into at or after 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022; and > Note: Paragraphs (b) and (c) mean this section will not apply to expenditure for on‑the‑job training or training provided by you in house. (a) a registered higher education provider (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); (b) a NVR registered training organisation (within the meaning of the National Vocational Education and Training Regulator Act 2011); (c) a registered education and training organisation (within the meaning of the Education and Training Reform Act 2006 (Vic.)); (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct for your 2023‑24 income year an amount that is equal to the sum of: (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (3) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑460 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (4) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (b) you incur the expenditure in the period starting at 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022 and ending at the end of: (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (4) For the purposes of paragraphs (1)(c) and (2)(c), in working out whether you can deduct an amount of expenditure on a depreciating asset, assume that: (b) throughout that effective life, you will use the asset for a taxable purpose to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose. (a) 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑470(1) or (3) applies in relation to the income year; and > Note: The deduction relates to the period of 1 July 2023 to 30 June 2024. An entity may have deducted an amount under paragraph (a) for a previous income year if the entity has a substituted accounting period. (2) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑470 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (3) Sections 8‑10, 40‑215 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (c) you start to use the asset, or have it installed ready for use, for any purpose after 30 June 2023 but before 1 July 2024; and (d) you start to use the asset, or have it installed ready for use, for a taxable purpose at a time (the start time) that is: (e) you are a small business entity, or an entity covered by subsection (4), for the income year that includes the start time; and (h) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) a new reasonably comparable depreciating asset that uses a fossil fuel (other than a use of which that is merely incidental) is available in the market at the start time; (ii) if the asset is being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than the other asset; (iii) if the asset is not being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than a new reasonably comparable depreciating asset that is available in the market at the start time; or (i) a depreciating asset (other than an asset excluded under subsection (6)) that uses electricity, or energy that is generated from a renewable source, to be more energy efficient; (iv) the use of electricity, or energy that is generated from a renewable source, by another depreciating asset to be monitored. (a) the amount is included in the second element of a depreciating asset’s cost under paragraph 40‑190(2)(a) of the Income Tax Assessment Act 1997; and (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (d) you are a small business entity, or an entity covered by subsection (4), for the income year in which the expenditure is incurred; and (i) if the asset could use a fossil fuel (other than a use of which that is merely incidental)—the asset to only use electricity, or energy that is generated from a renewable source; (ii) if the asset uses electricity, or energy that is generated from a renewable source—the asset to be more energy efficient; (g) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) For the purposes of paragraph (1)(b) or (3)(b), in working out whether you can deduct an amount of expenditure assume that: (i) for the purposes of paragraph (1)(b)—to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose; or (ii) for the purposes of paragraph (3)(b)—to the same extent as you use it for a taxable purpose in the income year in which the expenditure is incurred. (b) expenditure (other than expenditure referred to in subparagraph (3)(e)(i)) on an asset that can use a fossil fuel (other than a use of which that is merely incidental); (c) an asset that solely or predominantly generates electricity from a renewable source (for example, photovoltaic cells) or expenditure on such an asset; (d) an asset, or expenditure, being capital works for which you can deduct an amount under Division 43 of the Income Tax Assessment Act 1997; > Note: Subsections (1) and (3) also do not apply to an item of trading stock because such an asset is not a depreciating asset: see section 40‑30 of the Income Tax Assessment Act 1997. A reference in each of the following provisions of the Income Tax Assessment Act 1997 to a registration under section 27A of the Industry Research and Development Act 1986 includes a reference to a registration under former section 39J of that Act: (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) the R&D entity cannot deduct an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from: (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D entity could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:22pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the R&D entity is taken to be able to deduct under subsection 355‑315(2) of the new Act that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the R&D entity’s assessable income for the event year under subsection 355‑315(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 for the asset, the R&D entity is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑446 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the R&D entity is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑465 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: Section 355‑315 of the new Act would otherwise apply for the event in a case where the R&D entity had new law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by an R&D partnership; and (i) the partner can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the partner chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D partnership could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the partner is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:21.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D entity</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D partnership</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the partner is taken to be able to deduct under subsection 355‑525(2) of the new Act the partner’s proportion of that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the partner’s assessable income for the event year under subsection 355‑525(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partner’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if one or more partners (including the partner) in the R&D partnership is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset, the partner is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑448 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the partner is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑467 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s deductions under section 355‑520 of the new Act mentioned in subsection (4A) of this section. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the partner for the event, do so apply to the partner for the event. > Note 1: Section 355‑525 of the new Act would otherwise apply for the event in a case where the partner had new law deductions. Item 7 of the table in subsection 57‑110(2) in Schedule 2D to the Income Tax Assessment Act 1936 applies as if the deduction rules set out in the final column of that item also included former sections 73BA and 73BH of the Income Tax Assessment Act 1936. For the purposes of step 1 of the method statement in subsection 355‑415(2) of the Income Tax Assessment Act 1997, also disregard amounts that have already been taken into account under former subsection 73B(14AA) of the Income Tax Assessment Act 1936 for the R&D entity, the grouped entity and the R&D activities for an earlier income year. (1) This section applies if, apart from former paragraph 73B(10)(a) of the Income Tax Assessment Act 1936, an eligible company could deduct advance R and D expenditure in one or more income years commencing on or after 1 July 2011. > Note: That deduction would be under former section 73B of that Act as that former section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (a) apart from Subdivision H (prepaid expenditure) of Division 3 of Part III of the Income Tax Assessment Act 1936, an eligible company can deduct an amount under former section 73B, 73BA, 73BH, 73QA, 73QB or 73Y of that Act for an income year commencing before 1 July 2011; and (c) apart from former paragraph 73B(10)(a) of that Act, the eligible company could deduct an amount, as a result of that application of that Subdivision, for an income year commencing on or after 1 July 2011. > Note: That deduction would be under that Act as it applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (3) Former paragraph 73B(10)(a) of that Act is taken to apply to those income years commencing on or after 1 July 2011 as if the reference in that former paragraph to section 39J of the Industry Research and Development Act 1986 were a reference to section 27A of that Act. (4) An expression used in this section that is also used in former section 73B of the Income Tax Assessment Act 1936 has the same meaning in this section as it has in that former section. This Subdivision applies to core technology (within the meaning of former section 73B of the Income Tax Assessment Act 1936) if: (a) you incurred core technology expenditure (within the meaning of that former section) in an income year commencing before 1 July 2011 in relation to the core technology under one or more contracts entered into at or after the time referred to in former subsection 73B(12) of that Act; and (b) that expenditure (the undeducted expenditure) cannot be deducted for the last income year commencing before 1 July 2011. (1) This section applies for the purposes of Division 40 of the Income Tax Assessment Act 1997, other than sections 40‑292 and 40‑293 of that Act, if the core technology (the asset) is a depreciating asset. (2) Disregard this section, including its effect on the amount you can deduct under section 40‑25 of that Act for the asset, for the purposes of working out: (3) The asset’s opening adjustable value for the first income year that commences on or after 1 July 2011 (the first new income year) is equal to the amount of the undeducted expenditure. (4) Subsection 40‑75(2) of the Income Tax Assessment Act 1997 applies to the asset as if the first new income year were a change year (within the meaning of that subsection). If the core technology is not a depreciating asset, you can deduct the undeducted expenditure in equal proportions over a period of 5 income years starting in the first income year commencing on or after 1 July 2011. To work out the film component (if any) of your tax loss for the 1997‑98 income year or a later income year, apply former section 375‑805 of the Income Tax Assessment Act 1997. If you incurred a film loss for the purposes of former section 79F (Film losses of 1989‑90 to 1996‑97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989‑90 to 1996‑97 income years, that film loss is the film component of your tax loss for that income year. (1) To work out your film loss (if any) for the purposes of the Income Tax Assessment Act 1997 for the 1989‑90 or a later income year, apply former section 375‑810 of that Act. (2) You can deduct in the 1997‑98 or a later income year your film loss for any of the 1989‑90 to 1996‑97 income years only to the extent that it has not already been deducted. (1) Division 392 of the Income Tax Assessment Act 1997 applies to assessments for the 1998‑99 income year and later income years. (a) it had applied to your assessment for each income year before the 1998‑99 income year for which Division 16 of Part III of the Income Tax Assessment Act 1936 applied in relation to your income; and (b) you had carried on a primary production business during each income year before the 1998‑99 income year when you carried on a business of primary production; and (c) for each income year before the 1998‑99 income year you had a basic taxable income equal to your taxable income for the income year for the purposes of Division 16 of Part III of the Income Tax Assessment Act 1936. > Note: Section 149A of the Income Tax Assessment Act 1936 identifies what your taxable income for an income year is for the purposes of Division 16 of Part III of that Act. Division 392 of the Income Tax Assessment Act 1997 does not apply to your assessment for the 1998‑99 income year or a later income year if you made an election under section 158A (Election that Division not apply) of the Income Tax Assessment Act 1936 relating to an income year before the 1998‑99 income year. 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 A reference in Division 393 of the Income Tax Assessment Act 1997 to a deduction under section 393‑5 of that Act for making a farm management deposit is taken to include a reference to a deduction under section 393‑10 in Schedule 2G to the Income Tax Assessment Act 1936, as in force just before the commencement of this section, if the deposit was made before the 2010‑11 income year. #### 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 (b) the deposit was made with an FMD provider as a result of a request to which section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, applied; the unrecouped FMD deduction in respect of the deposit at that time is equal to the amount of the unrecouped deduction (within the meaning of the former subsection 159GA(3) of the Income Tax Assessment Act 1936) in respect of the deposit immediately before it ceased to be a deposit under the Loan (Income Equalization Deposits) Act 1976. > Note: This means that the unrecouped deduction relating to the deposit under the Loan (Income Equalization Deposits) Act 1976 continues to apply (by becoming an unrecouped FMD deduction) when the deposit is transferred to an FMD provider as a farm management deposit. The Loan (Income Equalization Deposits) Act 1976 was repealed on 22 February 2005. If a beneficiary of a trust was covered by paragraph (c) of the definition of primary producer in section 393‑25 in Schedule 2G to the Income Tax Assessment Act 1936 in the 2009‑10 income year, treat subsection 393‑25(3) of the Income Tax Assessment Act 1997 as having applied to the beneficiary for the purpose of determining the maximum number of choices that the trustee may make under subsection 393‑27(2) of that Act for the 2010‑11 income year. (a) a farm management deposit of an owner was unclaimed moneys for the purposes of section 69 of the Banking Act 1959; and (2) For the purpose of subsection 393‑10(1) of the Income Tax Assessment Act, treat the repaid unclaimed moneys as a repayment of the deposit of the owner. (3) To avoid doubt, the payment of unclaimed moneys to the Commonwealth under section 69 of the Banking Act 1959 is not a repayment of the deposit of the owner for the purposes of Division 393 of the Income Tax Assessment Act 1997. 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 #### 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 If a farm management deposit was made with an FMD provider as a result of a request under section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, then: (a) subsections 393‑40(1) to (4) of the Income Tax Assessment Act 1997 apply as if the day the deposit was made was the day on which the deposit was originally made under the Loan (Income Equalization Deposits) Act 1976; and (1) A copyright collecting society to which section 51‑43 of the Income Tax Assessment Act 1997 applies, may elect that, from 1 July 2004, the section apply to all ordinary income, and statutory income, collected or derived by the society on or after 1 July 2004. Division 420 of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division. Subdivision 615‑C of the Income Tax Assessment Act 1997 applies to you with the modifications set out in this Subdivision if you chose to obtain a roll‑over involving \*shares or units that: (b) were your trading stock, or revenue assets, at the time immediately before that disposal, redemption or cancellation. (1) Disregard subparagraph 615‑45(a)(ii), and paragraph 615‑45(b), of the Income Tax Assessment Act 1997 if the roll‑over relates to \*shares that were disposed of, redeemed or cancelled. (2) For each of the \*shares in the interposed company that you acquired in return for those of your shares or units in the original entity that were your \*trading stock at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  (2) For the purpose of calculating any profit or loss on a future disposal, cessation of ownership, or other realisation of a \*share in the interposed company that you acquired in return for those of your shares or units in the original entity that were \*revenue assets at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  Subdivision 620‑A of the Income Tax Assessment Act 1997 applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. (1) Part 3‑90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Act (No. 1) 2002 and amended by: (2) Section 713‑50 of the Income Tax Assessment Act 1997 (about factors to consider in determining destination of distribution by non‑fixed trust) applies for the purposes of this Part in the same way as it applies for the purposes of Part 3‑90 of that Act. ### Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly‑owned subsidiary of the entity (the future head company) that became the head company of the group; or (ii) at some time during that period, the entity was a wholly‑owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (ii) it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (1) If a group is a transitional group, its head company may, subject to subsection (3), choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (3) If the choice is to be made after the end of the period mentioned in paragraph (2)(a) and before the end of the day mentioned in paragraph (2)(b), it cannot be made unless each entity in relation to which the conditions in subsection (5) are satisfied has agreed to it being made. (a) the entity (the leaving entity) ceased to be a subsidiary member of the group before the choice was made (in a subsection (3) case) or before the revocation took place (in a subsection (4) case); and (b) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; and (c) the asset had become that of the head company because that section applied when a chosen transitional entity (whether or not the same entity as the leaving entity) became a subsidiary member. Section 716‑855 applies for the purposes of this Division in the same way as that section applies for the purposes of Part 3‑90 of the Income Tax Assessment Act 1997. is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705‑B of that Act and with this Division. 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity Section 701‑10 (cost to head company of assets of joining entity) and subsection 701‑35(4) (setting value of trading stock at tax‑neutral amount) of the Income Tax Assessment Act 1997 do not apply to the assets of a chosen transitional entity. > Note: The fact that the head company inherits the entity’s history under section 701‑5 of that Act when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time. #### 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities (2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non‑chosen subsidiary) is worked out in a special way. (b) for each sub‑group (see subsection (6)) that exists in relation to the non‑chosen subsidiary—the sub‑group’s notional allocable cost amount (see subsection(5)) for the non‑chosen subsidiary. (4) The head company adjusted allocable amount for the non‑chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if; (b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of head company’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub‑group in relation to the non‑chosen subsidiary. (5) For each sub‑group that exists in relation to the non‑chosen subsidiary, there is a sub‑group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non‑chosen subsidiary if: (a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non‑chosen subsidiary and the entities comprising the sub‑group; and (c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub‑group membership interests (see subsection (6)) in relation to the sub‑group, and any such entity held those membership interests during the period when it actually held them; and (d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of chosen transitional entity’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub‑group. (6) If a chosen transitional entity holds membership interests in a non‑chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non‑chosen subsidiary: (a) the chosen transitional entity and each interposed non‑chosen subsidiary comprise a sub‑group in relation to the non‑chosen subsidiary (unless the non‑chosen subsidiary is included in a sub‑group in relation to another non‑chosen subsidiary); and (i) the membership interests that the chosen transitional entity holds directly in the non‑chosen subsidiary or in any of the interposed non‑chosen subsidiaries; (ii) the membership interests that each interposed non‑chosen subsidiary holds directly in the non‑chosen subsidiary or in any of the other interposed non‑chosen subsidiaries. #### 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities If any provision of the Income Tax Assessment Act 1997 would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply. > Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred. (1) This section has effect for the purposes of applying section 705‑70 (step 2 of allocable cost amount) of the Income Tax Assessment Act 1997 in relation to a transitional entity. (2) In spite of subsection 705‑70(1A) of that Act, if the amount of an accounting liability of the transitional entity would be different when it becomes an accounting liability of the transitional group, that difference is not taken into account in working out the amount of the liability. #### 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different (a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset (the roll‑over asset) for which there was: (ii) roll‑over relief under section 40‑340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and (i) became an asset of the head company when the transitional group came into existence because subsection 701‑1(1) (the single entity rule) of that Act applies; or differs at that time from what it would have been if the act, transaction or event that gave rise to the CGT event had not occurred in relation to the roll‑over asset; then the provisions mentioned in subsection (2) apply as if the act, transaction or event had not occurred in relation to the roll‑over asset. (a) the act, transaction or event mentioned in subsection (1) happened before a demerger and in connection with the demerger; and (b) before the transitional group came into existence, at least one of the following entities ceased to be a member of the demerger group because of the demerger: (i) the originating company in relation to the roll‑over, or the transferor in relation to the roll‑over relief, was a foreign resident; and (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as a transitional foreign‑held subsidiary of the group. #### 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets (1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied. (2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset. (a) the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and (b) former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset. (4) The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group. (6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses. #### 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets (b) just before the transitional group came into existence, the entity that became the head company held a pre‑CGT asset; and (d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre‑CGT asset and is held by the head company only because the entity is taken by subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company. (2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence. #### 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity (1) This section provides for an addition to the step 1 amount for working out under section 711‑20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity) that ceases to be a subsidiary member of the transitional group at a time (the leaving time), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701‑1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount for paragraph</span><span> </span><span>(2)(c)</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">If, because of the circumstances described in paragraphs</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(a) and (b):</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">The amount is:</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:180.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following provisions applied to the entity:</span></p><p class="Tablea"><span>(a) former section</span><span> </span><span>61A of the </span><span style="font-style:italic">Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(b) former Subdivision</span><span> </span><span>57</span><span>‑</span><span>I in Schedule</span><span> </span><span>2D to the</span><span style="font-style:italic"> Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(c) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(4) of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td><td style="width:148.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the amount treated as being the cost of the asset under that provision; and</span></p><p class="Tablea"><span>(b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>2</span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following subsections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span><span> applied to the entity:</span></p><p class="Tablea"><span>(a) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(5);</span></p><p class="Tablea"><span>(b) 58</span><span>‑</span><span>70(3)</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The amount treated as being the cost, or the first element of the cost, of the asset under that subsection</span></p></td></tr></tbody></table> ``` (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997, as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="4" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amounts and provisions for different dates of acquisition</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Date of the acquisition</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Amount</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Provision of Division</span><span style="font-weight:bold"> </span><span style="font-weight:bold">58 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> applying to the acquisition and the working out of the amount</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:76.7pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>160</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>220</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>After 30</span><span> </span><span>June 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>First element of the cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subsection</span><span> </span><span>58</span><span>‑</span><span>70(5)</span></p></td></tr></tbody></table> ``` > Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. > Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and ### Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: #### 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70‑45 to 70‑70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420‑51 to 420‑58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (a) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority‑owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority‑owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority‑owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority‑owned entity became a subsidiary member of the group, there was roll‑over relief under section 40‑340 of the Income Tax Assessment Act 1997. (a) while the asset is, because subsection 701‑1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, its tax cost setting amount is taken to be equal to the continuing majority‑owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711‑30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997. (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset becomes that of an entity (a new asset holder) other than the head company because subsection 701‑1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder) acquiring some or all of the membership interests in the new asset holder; and (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset is acquired by another entity (a new asset holder) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll‑over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value asset just before the acquisition; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 #### 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 (b) members of the consolidated group or the MEC group mentioned in subsection 104‑500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701‑1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701‑1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (3) If this section applies, neither subsection 104‑500(4) nor subsection 104‑500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year. ### Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C‑B); and (b) modifies certain rules in Part 3‑90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C‑C). > Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719‑2 and 719‑10 of this Act). 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership #### 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(ii) of that Act (see subsection 719‑2(3) of this Act). (b) a trust (a non‑resident trust) that does not meet the requirements in any item of the table in section 703‑25 of the Income Tax Assessment Act 1997. (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non‑resident company or a non‑resident trust; or Test entity must be a subsidiary member on assumption that non‑resident companies and non‑resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non‑resident company or non‑resident trust were a subsidiary member of the group. (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv). #### 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(iii) of that Act (see subsection 719‑2(3) of this Act). (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C‑10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3). If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C‑10 are met; and (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (ii) an entity that is a transitional foreign‑held indirect subsidiary of the group because of another application of this paragraph; Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign‑held indirect subsidiary would need to have satisfied the set of requirements in either section 701C‑10 or 701C‑15 (1) This Subdivision applies if an entity (the transitional foreign‑held joining entity) that is a transitional foreign‑held subsidiary or a transitional foreign‑held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time) the group comes into existence. (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign‑held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign‑held indirect subsidiary that becomes a subsidiary member at that time takes account of this. (a) section 701‑10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); apply, for the purposes of setting the tax cost of an asset of the transitional foreign‑held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign‑held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. > Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign‑held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign‑held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign‑held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign‑held subsidiary and the other entity. > Note 2: If the transitional foreign‑held joining entity is a transitional foreign‑held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705‑A of the Income Tax Assessment Act 1997, in its application in accordance with Subdivision 705‑B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company. Subsection 701‑35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax‑neutral amount) does not apply to the assets of the transitional foreign‑held joining entity if it is a transitional foreign‑held subsidiary. Section 701‑15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: (a) this section applies to each membership interest in the transitional foreign‑held subsidiary that is held by an entity (an eligible non‑resident) of a kind mentioned in subparagraph 701C‑20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign‑held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701‑1(2) of the Income Tax Assessment Act 1997 applies to the eligible non‑resident in the same way as it applies to the head company. Section 711‑5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: > Note: If the leaving entity is a transitional foreign‑held subsidiary (within the meaning of section 701C‑20 of the Income Tax (Transitional Provisions) Act 1997), this Division will, in accordance with subsection 701‑15(4) of this Act (see section 701C‑40 of the first‑mentioned Act), apply to membership interests that an eligible non‑resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity. (1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707‑C of the Income Tax Assessment Act 1997. (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period. (1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if: (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (d) the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997. (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: (1) The head company of a consolidated group may make a choice in the approved form to apply section 701D‑10 to another entity. (2) However, the head company cannot make that choice if subsection 701D‑10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (a) an asset of the head company because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701‑55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40‑77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40‑77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40‑285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount. (b) after the asset became an asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). > Note: The final entity will be different from the head company if an entity (the leaving entity) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40‑285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. > Note: The final entity will be entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701‑5 (the entry history rule) of that Act and perhaps also section 701‑40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity) became a subsidiary member of the group; and It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). > Note: In some cases, section 705‑47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40‑285(3) of this Act. If: (b) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and subsection 40‑285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701‑10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997. > Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997. (1) For the purposes of Part 3‑90 of the Income Tax Assessment Act 1997, this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960‑G of that Act whether the interest or right is a membership interest of the entity in the other entity. > Note: Under Subdivision 960‑G of the Income Tax Assessment Act 1997, a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001) apply to transactions in relation to the interest or right at the relevant time. Despite the amendments of section 703‑35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) If an entity (the joining entity) to which section 40‑75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time), this Subdivision applies in relation to: (ii) became assets of the head company of the group at the joining time because of section 701‑1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure. (1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). (2) If the joining entity could not deduct an amount under Subdivision 40‑B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701‑55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40‑35, 40‑37, 40‑40 or 40‑43 treated the joining entity as holding a notional asset. > Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705‑30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. (a) deductions under former Subdivision 330‑A, 330‑C or 330‑H of the Income Tax Assessment Act 1997, or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated an entity as holding because of the expenditure. (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); > Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40‑75(4) of this Act, but may have been reset since under Subdivision 40‑B of the Income Tax Assessment Act 1997. > Note 2: The effective life of a notional asset is specified by whichever one of sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act is relevant to the notional asset. (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (9) Section 705‑55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705‑45 of that Act. > Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705‑40 of the Income Tax Assessment Act 1997. (a) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701‑5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. > Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705‑305(3). (ii) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707‑A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member. 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value #### 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707‑320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor) other than the real loss‑maker mentioned in subsection 707‑315(1) of that Act for the bundle; and (b) both the real loss‑maker and the value donor became members of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (ca) neither the real loss‑maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (ii) a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (ii) section 713‑540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (2) It must have been possible for the real loss‑maker to have transferred the loss to the value donor under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss‑maker at the initial transfer time the amount worked out using the formula:  > Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707‑327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss‑maker to the transferee. > total of real loss‑maker’s non‑foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss‑makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) included in a bundle of losses: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. #### 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value (1) This section affects the calculation of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707‑325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936, in the bundle). > Note: This section does not affect the calculation of the real loss‑maker’s modified market value for other purposes (such as the real loss‑maker being a value donor for the purposes of another application of section 707‑325 of this Act). (3) One condition is that the event was an injection of capital directly into the real loss‑maker by the value donor mentioned in section 707‑325 of this Act. (c) that would have caused subsection 707‑325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss‑maker’s modified market value (even if no other events described in subsection 707‑325(4) of that Act had occurred), apart from this section. (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss‑maker (whether or not the event also involved either the value donor or the real loss‑maker); or (1) This section has effect for the purposes of working out under Subdivision 707‑C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707‑325, as if there were added to the modified market value of the real loss‑maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (c) the loss is not a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707‑A of that Act at the initial transfer time had the company: > Note: This section has effect even if the amount added to the real loss‑maker’s modified market value under section 707‑325 is nil because the value donor’s modified market value is nil. (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707‑325, as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (4) If the transferee mentioned in subsection 707‑325(1) chooses, sections 707‑310, 707‑335 (except paragraph 707‑335(2)(a)) and 707‑340 of the Income Tax Assessment Act 1997 (and subsections 707‑315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: > Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707‑325(1)(d) and (e) and subsection 707‑325(2) in an application of section 707‑325 separate from the application of that section mentioned in paragraph (1)(a) of this section. > Note: This means that a loss that provided a basis for section 707‑325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. (b) in connection with the requirement that it must have been possible for a company (the notional transferor) to transfer to another company (the notional transferee) for an income year a loss under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997. (b) ends immediately after the initial transfer time mentioned in subsection 707‑320(1) of the Income Tax Assessment Act 1997. > Note: For the purposes of identifying the trial year using the definition in section 707‑120 of the Income Tax Assessment Act 1997, the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time. (1) Subsection (3) of this section affects the calculation, under section 707‑325 of the Income Tax Assessment Act 1997 and section 707‑325 of this Act, of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (the formation time) the group became a consolidated group; and (b) the provisions described in subsection 707‑327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707‑327(1)(b) and (c) of this Act as if the bundle included the loss; and (d) subsection 707‑325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707‑325(1) of this Act chooses that this section apply in relation to the real loss‑maker. (2) Section 707‑325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. (3) Disregard for the purposes of subsection 707‑325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707‑325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or > Note: Disregarding such an event could have a direct or indirect effect on the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss‑maker’s modified market value calculated under section 707‑325 of the Income Tax Assessment Act 1997, if the real loss‑maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707‑325 of this Act to add an amount to the real loss‑maker’s modified market value for those purposes. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) that: (b) was transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from an entity other than the real loss‑maker. (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997. Disregard an event that is described in subsection 707‑325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707‑325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004. (1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss‑maker) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time) the transferee became the head company of a consolidated group; and (ii) the conditions in one or more of paragraphs 165‑15(1)(a), (b) and (c) did not exist in relation to the real loss‑maker; and (da) the real loss‑maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non‑transferred losses) of the same sort that the transferee made without a transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non‑transferred losses). (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. <table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Limit on utilising the losses</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For this income year:</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the losses that the transferee may utilise cannot exceed:</span></p></td></tr></thead><tbody><tr><td style="width:20.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:120.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The first income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span style="font-size:8pt; vertical-align:2pt">1</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The second income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) </span><span style="font-size:8pt; vertical-align:2pt">2</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the amount of the losses utilised for the income year mentioned in item</span><span> </span><span>1</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The third income year ending after the initial transfer time, or a later income year</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time</span></p></td></tr></tbody></table> ``` (4) Subdivision 707‑C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707‑A of that Act. > Note: This has 2 effects. First, Subdivision 707‑C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707‑A of that Act). (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). (7) This section does not limit the transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company. In working out when a choice may be made under subsection 707‑325(5), 707‑327(5), 707‑328A(4) or 707‑350(5), ignore losses to which section 713‑535 of the Income Tax Assessment Act 1997 applies. > Note: That section deals with losses transferred under Subdivision 707‑A of that Act from certain wholly‑owned subsidiaries of life insurance companies that are members of a consolidated group. Section 707‑405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act. (1) This section reduces the adjustable value of a notional asset that section 40‑35, 40‑37, 40‑38, 40‑40 or 40‑43 treats the head company of a consolidated group as holding, if: (b) that section treats the leaving entity as holding a notional asset because of section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997. > Note: Section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time. The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences. (1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event) happening involving an entity (the originating entity) and another entity (the recipient entity) if: (a) the event occurs in connection with a life insurance company (the member life insurance company) becoming a member of a consolidated group; and (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest) in a company or in another trust. (a) a life insurance company transfers an asset (also the original asset) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320‑200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset) to its segregated exempt assets where, apart from this Subdivision, section 320‑255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event) is made in connection with the life insurance company (also the member life insurance company) becoming a member of a consolidated group. (1) This Subdivision applies only if the originating entity (for a section 713‑505 case) or the life insurance company (for a section 713‑510 case) chooses that it apply. (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713‑510 of the Income Tax Assessment Act 1997; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713‑510 of the Income Tax Assessment Act 1997; and (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs. This Act, and the Income Tax Assessment Act 1997, apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group. (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain) that the originating entity would have made as a result of the deferral event is disregarded; and (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount) under paragraph 320‑15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (1) This section operates if, after the deferral event happens, another event (the new event) happens where the new event is: (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (i) the original asset being transferred to or from the company’s virtual PST under section 320‑180, 320‑185 or 320‑195 of the Income Tax Assessment Act 1997; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320‑235, 320‑240 or 320‑250 of that Act; or (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. > Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713‑505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (1) For a section 713‑505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713‑535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: (a) an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group at a time (the leaving time); and (b) but for the cessation of membership and section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision. Sections 716‑340 and 716‑345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. <table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:345.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Extended operation of sections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 1</span><br><span style="font-weight:bold">Sections</span><span style="font-weight:bold"> </span><span style="font-weight:bold">716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">340 and 716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">345 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> operate in relation to:</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 2</span><br><span style="font-weight:bold">In the same way as they operate in relation to:</span></p></td></tr></thead><tbody><tr><td style="width:5.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:161.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>46</span><span>‑</span><span>90 of that Act</span></p></td><td style="width:156.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>40</span><span>‑</span><span>455 of that Act</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software pool created under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure allocated to a software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Software, expenditure on which was in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>In</span><span>‑</span><span>house software, expenditure on the development of which is allocated to a software development pool</span></p></td></tr></tbody></table> ``` (1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: Section 703‑30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004. (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time) a wholly‑owned subsidiary of the entity that became the head company of the group (the head entity), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier‑1 company of the group at the formation time. Despite the amendment of section 719‑30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) Section 719‑160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719‑160(3) of the Income Tax Assessment Act 1997. (3) However, that effect of section 719‑160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division. (2) Paragraphs 701‑1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier‑1 company at the time the MEC group came into existence. (a) the entity and one or more other entities were members of a potential MEC group as eligible tier‑1 companies, throughout the period: (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier‑1 company, at the time the transitional group came into existence. To avoid doubt, sections 707‑325 and 707‑327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719‑305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707‑A of that Act. Subsection 719‑325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006. (1) A reference in an agreement to item 25 of the table in subsection 721‑10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: (1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: Division 725 applies to a scheme entered into on or after 1 July 2002. It also applies to a scheme entered into on or after 27 June 2002, but only if: ### Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (1) Division 727, as inserted by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 and amended by the New Business Tax System (Consolidation and Other Measures) Act 2003, applies to a scheme entered into on or after 1 July 2002. (b) a presumed indirect value shift that happens under the scheme and affects a realisation event that happens on or after 1 July 2002. (a) the economic benefits taken into account in determining that the scheme has resulted in that indirect value shift or presumed indirect value shift include economic benefits provided by: > Note: In that case, the consequences of the trigger event are worked out under Division 138 or 139 of the Income Tax Assessment Act 1997: see items 13 and 14 of Schedule 15 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002. (1) An indirect value shift does not have consequences under Division 727 of the Income Tax Assessment Act 1997 if, to the extent of at least 95% of their total market value, the greater benefits consist entirely of: (a) a right to have services that are covered by section 727‑240 of that Act provided directly by the losing entity to the gaining entity; or (d) if the losing entity’s 2002‑2003 income year ends before 30 June 2003—the start of the losing entity’s 2004‑2005 income year. (2) For the purposes of section 727‑850 (about a presumed indirect value shift affecting a realisation event) of the Income Tax Assessment Act 1997, subsection (1) of this section applies to the presumed indirect value shift: #### 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (2) Paragraph 727‑470(2)(a) of the Income Tax Assessment Act 1997 (as in force immediately before the commencement of this section) continues to have effect in relation to the indirect value shift as if the repeals and amendments made by Schedule 1, Parts 1 and 2 of Schedule 3 and Schedule 8 to the Tax Laws Amendment (Small Business) Act 2007 had not been made. ## Division 290 Contributions ## 290‑10 Directed termination payments not 290‑10 Directed termination payments not deductible etc. Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82‑10F). ## 290‑15 Early balancers—deduction limits 290‑15 Early balancers—deduction limits from end of 2006‑2007 income year to 1 July 2007 (2) The object of this section is to apply (with modifications) provisions limiting deductibility in respect of certain contributions made during the period that: (a) Subdivisions AA and AB of Division 3 of Part III of the Income Tax Assessment Act 1936, as in force just before they were repealed by the Superannuation Legislation Amendment (Simplification) Act 2007; (b) any other provision of the Income Tax Assessment Act 1936, or of any instrument made under that Act, to the extent that it relates to the operation of those Subdivisions; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of those Subdivisions. (b) the deduction limit mentioned in section 82AAC for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (c) the deduction limit mentioned in section 82AAT for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (d) Division 290 of the Income Tax Assessment Act 1997 did not apply to contributions made during the income year mentioned in paragraph (a). ## Division 291 Excess concessional contributions ## Subdivision 291 ‑A—Application of Division 291 of the Income Tax Assessment Act 1997 ## 291‑10 Application of Division 291 of th 291‑10 Application of Division 291 of the Income Tax Assessment Act 1997 ## Subdivision 291 ‑C—Modifications for defined benefit interests ## 291‑170 Transitional rules for notional 291‑170 Transitional rules for notional taxed contributions (2) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of a defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection and subsection (4), the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 5 September 2006; (b) the defined benefit interest mentioned in paragraph (2)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 5 September 2006, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (2)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (4) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of the defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection, the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 12 May 2009; (b) the defined benefit interest mentioned in paragraph (4)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 12 May 2009, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (4)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or ## Division 292 Excess non‑concessional contributions tax ## 292‑80 Application of excess non‑concess 292‑80 Application of excess non‑concessional contributions tax from 10 May 2006 to 1 July 2007 (1) The object of this section is to apply (with modifications) provisions relating to excess non‑concessional contributions tax in respect of certain contributions made during the period that: (b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision. (ea) in a case where paragraph 292‑95(1)(b) of that Act would have allowed the contribution mentioned in that paragraph to be made at a time within that period—that paragraph allowed the contribution to be made on or before 30 June 2007; and (f) paragraph 292‑95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and (fa) in a case where subsection 292‑100(2), (4), (7) or (8) of that Act would have allowed the contribution mentioned in that subsection to be made at a time within that period—that subsection allowed the contribution to be made on or before 30 June 2007; and (g) paragraph 292‑100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and (h) contributions made during that period that are covered under section 292‑100 of that Act reduce the person’s CGT cap amount for the 2007‑2008 financial year in accordance with subsection 292‑105(2) of that Act (and despite subsection (1) of that section); and (i) if the conditions in subsection (4) are satisfied—the person’s excess non‑concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and (b) the Commissioner gives the person a transitional release authority under subsection 292‑80A(2) in response to the application; and (c) the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292‑80B within 21 days after the date of the release authority; and (d) the superannuation provider pays the person the amount required under section 292‑80C in relation to the transitional release authority. (b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act). (6) The amount to be included in the first person’s amount of non‑concessional contributions under subparagraph (3)(b)(ii) is the sum of: (a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and (b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made. (c) under Division 295 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)), the contribution is included in the assessable income of the superannuation provider in relation to the superannuation plan to which the contribution is made; and (8) For the purposes of paragraph (7)(b), treat the person as an employee of the other entity if the person would be treated as an employee of the other entity under Division 290 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)). ## 292‑80A Transitional release authority 292‑80A Transitional release authority (1) A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007. (2) The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292‑80(3)(b)(i), the person would have excess non‑concessional contributions for the financial year mentioned in paragraph 292‑80(3)(a). (4) For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out: ## 292‑80B Giving a transitional release au 292‑80B Giving a transitional release authority to a superannuation provider The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 21 days after the date of the release authority. ## 292‑80C Superannuation provider given tr 292‑80C Superannuation provider given transitional release authority must pay amount (1) A superannuation provider that has been given a transitional release authority in accordance with section 292‑80B must pay to the person within 30 days after receiving the release authority the least of the following amounts: (a) if the person requests the provider in writing to pay a specified amount in relation to the release authority—that amount; (c) the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person in complying superannuation plans. > Note 1: Section 288‑95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection. > Note 2: Section 288‑100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority. > Note 3: For reporting obligations on the superannuation provider in these circumstances, see section 390‑65 in Schedule 1 to the Taxation Administration Act 1953. (2) The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person in complying superannuation plans. (3) Section 307‑125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section. ## 292‑85 Non‑concessional contributions ca 292‑85 Non‑concessional contributions cap for a financial year (a) your non‑concessional contributions cap for the 2015‑2016 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsection 292‑85(7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 applies after the commencement of this section as if: (d) subsection 292‑85(6) of that Act as so amended had been applied (taking into account paragraph (c) of this subsection) for the purposes of working out your non‑concessional contributions cap for the 2016‑2017 financial year. (2) For the purposes of working out your non‑concessional contributions caps for the 2017‑2018 financial year and the 2018‑2019 financial year, if: (a) your non‑concessional contributions cap for the 2016‑2017 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsections 292‑85(6) and (7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 apply after the commencement of this section as if the amount worked out under subsection 292‑85(5) of that Act as so amended were $380,000. (3) To avoid doubt, this section does not affect your non‑concessional contributions cap for any financial year that ended before 1 July 2017. ## 292‑90 Non‑concessional contributions fo 292‑90 Non‑concessional contributions for a financial year The tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your non‑concessional contributions (see section 292‑90 of the Income Tax Assessment Act 1997) for the financial year. ## Division 293 Sustaining the superannuation contribution concession ## Subdivision 293 ‑A—Application of Division 293 tax rules ## 293‑10 Application of Division 293 of th 293‑10 Application of Division 293 of the Income Tax Assessment Act 1997 ## Division 294 Transfer balance cap ## Subdivision 294 ‑A—Application of Division 294 of the Income Tax Assessment Act 1997 ## 294‑10 Application of Division 294 of th 294‑10 Application of Division 294 of the Income Tax Assessment Act 1997 (2) Subject to section 294‑55, the amendments of Division 294 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Treasury Laws Amendment (2017 Measures No. 2) Act 2017 apply on and after 1 July 2017. ## 294‑30 Minor excess transfer balances di 294‑30 Minor excess transfer balances disregarded if remedied in first 6 months Despite sections 294‑30 and 294‑140 of the Income Tax Assessment Act 1997 (which are about when you have excess transfer balance), you do not have excess transfer balance in your transfer balance account on any day in the period of 6 months beginning on 1 July 2017 if: (a) the only transfer balance credits in the account in that period arose under item 1 of the table in subsection 294‑25(1) of that Act (which is about superannuation income streams you have just before 1 July 2017); and (b) the sum of those transfer balance credits exceeds your transfer balance cap, but is less than or equal to $1,700,000; and (c) at the end of the period, the sum of all the transfer balance debits arising in your transfer balance account equals or exceeds the amount of the excess from paragraph (b). ## 294‑55 Repayment of limited recourse bor 294‑55 Repayment of limited recourse borrowing arrangements (1) Despite subsection 294‑10(2), a transfer balance credit arises under item 4 of the table in subsection 294‑25(1) of the Income Tax Assessment Act 1997 only in relation to a borrowing that arises under a contract entered into on or after 1 July 2017. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2017 is treated as if it arose under a contract entered into before 1 July 2017 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. ## 294‑80 Structured settlement contributio 294‑80 Structured settlement contributions made before 1 July 2017—debit increased to match credits (a) on 1 July 2017, a transfer balance debit arose in your transfer balance account under item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997; and (b) the sum of all the transfer balance credits that arise in your transfer balance account under item 1 of the table in subsection 294‑25(1) of that Act exceeds the amount that would, apart from this section, be the amount of that debit. (2) Despite column 2 of item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997, the amount of the transfer balance debit is instead equal to the sum worked out under paragraph (1)(b) of this section. ## Subdivision 294 ‑B—CGT relief 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain ## 294‑100 Object 294‑100 Object > The object of this Subdivision is to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the following legislative changes: (a) the introduction of a transfer balance cap (as a result of Schedule 1 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016); (b) the exclusion of transition to retirement income streams (and similar income streams) from being superannuation income streams in the retirement phase (as a result of Schedule 8 to that Act). ## 294‑105 Interpretation 294‑105 Interpretation (a) starting on the start of the day on which the Bill that became the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 was introduced into the House of Representatives; and ## 294‑110 Segregated current pension asset 294‑110 Segregated current pension assets (a) at the start of the pre‑commencement period, a CGT asset of a fund is a segregated current pension asset of the fund; and (i) at a time (the cessation time) in the pre‑commencement period, the asset ceases to be a segregated current pension asset of the fund; or (ii) at the start of 1 July 2017 (also the cessation time), the asset ceases to be a segregated current pension asset of the fund because it supports a superannuation income stream covered by subsection 307‑80(3) of the Income Tax Assessment Act 1997; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and ## 294‑115 Superannuation funds using the p 294‑115 Superannuation funds using the proportionate method—deemed sale and purchase of CGT asset (b) the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year is greater than nil; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and ## 294‑120 Superannuation funds using the p 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain #### 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑115(3)(a), the fund makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the fund’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Subsection 295‑390(1) of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). > 2016‑17 non‑exempt proportion means 1 minus the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year. ## 294‑125 Pooled superannuation trust usin 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset #### 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset (i) the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997 in respect of the trust for the 2016‑17 income year; (ii) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year; and (d) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and ## 294‑130 Pooled superannuation trusts usi 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain #### 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑125(3)(a), the trust makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the trust’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Section 295‑400 of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). (a) unless paragraph (b) applies—1 minus the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997; or (b) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage worked out by subtracting the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year from 100%. ## Division 295 Taxation of superannuation entities ## Subdivision 295 ‑B—Modifications of the Income Tax Assessment Act 1997 for 30 June 1988 assets ## 295‑75 Application of Subdivision 295‑75 Application of Subdivision This Subdivision applies to an entity that is the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust. ## 295‑80 Meaning of 30 June 1988 asset 295‑80 Meaning of 30 June 1988 asset For the purposes of this Subdivision, an asset is a 30 June 1988 asset of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust if the entity owned it at the end of 30 June 1988. > Note: Section 295‑90 of the Income Tax Assessment Act 1997 treats these assets as having been acquired on 30 June 1988. ## 295‑85 Cost base of 30 June 1988 asset 295‑85 Cost base of 30 June 1988 asset (1) The first element of the cost base of each 30 June 1988 asset of the entity’s is the greater of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). (2) The first element of the reduced cost base of each 30 June 1988 asset of the entity’s is the lesser of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). ## 295‑90 Market value of stock exchange li 295‑90 Market value of stock exchange listed assets the market value of the asset as at the end of 30 June 1988 is the average of the highest and lowest trade prices for identical assets recorded on 30 June 1988 in whichever of the following markets is applicable: (d) if, on that date, there was a State capital city market (other than the Sydney market) that recorded a higher volume of trading than the Sydney market in identical assets—that State capital city market; (2) For the purposes of this section, an asset is taken to have been listed on an Australian stock exchange on 30 June 1988 if, and only if, on that day the asset had the status of having been granted official quotation by a securities exchange within the meaning of the former Securities Industry Act 1980 or the law of a State or Territory corresponding to that former Act. ## 295‑95 Adjustment of cost base as at 30 295‑95 Adjustment of cost base as at 30 June 1988—return of capital (b) at any time during the period commencing at the time when the shares were acquired and ending at the end of 30 June 1988, the company paid an amount that was not a dividend to the entity in respect of the shares; (b) at any time during the period commencing at the time when the interest or unit was acquired and ending at the end of 30 June 1988, the trustee of the trust paid an amount to the entity in respect of the interest or unit, being: (i) in a case where the entity was exempt from tax for the year of income in which the payment was made—an amount that, if the entity had not been exempt from tax, would not have been the entity’s assessable income; or the cost base to the entity of the interest or unit as at 30 June 1988 is reduced by so much of the amount as is not attributable to a deduction allowed under former Division 10C or 10D of the Income Tax Assessment Act 1936. ## 295‑100 Exercise of rights 295‑100 Exercise of rights (1) Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (2) and (3) of this section apply if an entity exercises rights or options as mentioned in that section to acquire: (b) the greater of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (b) the lesser of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (4) The payment referred to in subsection (2) or (3) can include giving property. To the extent that the payment does, use the market value of the property in working out the amount of the payment. ## Subdivision 295 ‑C—Notices relating to contributions ## 295‑190 Deductions for personal contribu 295‑190 Deductions for personal contributions (1) A notice given under subsection 82AAT(1A) or (1CB) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑170 of the Income Tax Assessment Act 1997. (2) A notice given under subsection 82AAT(1C) or (1CD) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑180 of the Income Tax Assessment Act 1997. ## Subdivision 295 ‑F—Exempt income ## 295‑390 Fixed interest complying ADFs—ex 295‑390 Fixed interest complying ADFs—exemption of income attributable to certain 25 May 1988 deposits (1) A proportion of the ordinary income and statutory income of a continuously complying fixed interest ADF of an income year that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).  > Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the income year. > Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the income year. (4) A choice for the purposes of the definition of reckoning time in subsection (5) must be made on or before the date of lodgment of the income tax return of the ADF for the income year to which the choice relates, or before a later day allowed by the Commissioner. > continuously complying fixed interest ADF, in relation to an income year (the current year), means a fund that is a fixed interest complying ADF in relation to each of the following years: > current 25 May balance, in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time: (b) subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 September 1989 is to be added to the balance; (b) a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that day, made a deposit with the ADF that consisted wholly or partly of the roll‑over (as defined in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 as in force on that day) of an eligible termination payment as so defined, being an eligible termination payment that included a concessional component (as so defined). > fixed interest complying ADF, in relation to a year of income, means a complying ADF where both of the following conditions are satisfied: (a) not less than 90% of the amount that, apart from this section, would be the assessable income of the ADF of the income year (other than non‑arm’s length income or amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997) consists of any one or more of the following: (ii) any profit arising on the disposal, redemption, cancellation or maturity of a CGT asset referred to in paragraph 295‑85(3)(b) of the Income Tax Assessment Act 1997; (iii) an amount included in assessable income under Division 16E of Part III of the Income Tax Assessment Act 1936 (or would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply); (ii) virtual PST life insurance policies (as defined in the Income Tax Assessment Act 1997) issued by a life insurance company. > original 25 May balance, in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988. > reckoning time, in relation to an ADF in relation to an income year, means the beginning of the income year, or such other time during the income year as the ADF chooses in accordance with subsection (4). (6) This section does not apply to an ADF in relation to an income year unless the whole of the benefit that would accrue to the ADF from the application of this section in relation to the income year has been, or can reasonably expected to be, passed on to eligible depositors. ## Subdivision 295 ‑G—Deductions ## 295‑465 Complying funds—deductions for i 295‑465 Complying funds—deductions for insurance premiums An election made by the trustee of a complying superannuation fund under subsection 279(4) of the Income Tax Assessment Act 1936 that had effect for the income year of the fund in which 30 June 2007 occurs continues to have effect as if it had been made under section 295‑465 of the Income Tax Assessment Act 1997. ## Subdivision 295 ‑I—No‑TFN contributions income ## 295‑610 No‑TFN contributions income 295‑610 No‑TFN contributions income Subdivisions 295‑I (no‑TFN contributions) and 295‑J (Tax offset for no‑TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006‑2007 income year ends on a day (the end day) after 1 July 2007 as if: (b) the entity’s no‑TFN contributions income for the entity’s 2007‑2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007‑2008 income year if the contributions concerned had been made in the entity’s 2007‑2008 income year. ## Division 301 Superannuation member benefits paid from complying plans etc. ## 301‑5 Extended application to certain fo 301‑5 Extended application to certain foreign superannuation funds (2) Division 301 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section because you are a member of the fund in the same way as it would apply if the payments were superannuation member benefits paid to you from a complying superannuation fund. ## 301‑85 Extended meaning of disability su 301‑85 Extended meaning of disability superannuation benefit for superannuation income stream For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. ## 301‑90 Application of Subdivision 301‑F 301‑90 Application of Subdivision 301‑F of the Income Tax Assessment Act 1997 Subdivision 301‑F of the Income Tax Assessment Act 1997 applies in relation to income years starting on or after 1 July 2007. ## 301‑95 Amendment of assessments to give 301‑95 Amendment of assessments to give effect to Subdivision 301‑F of the Income Tax Assessment Act 1997 etc. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to the following in respect of an income year that starts on or before 1 July 2021: (b) the amendments of the Income Tax Assessment (1997 Act) Regulations 2021 made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023. ## 301‑100 Amendment of assessments—transit 301‑100 Amendment of assessments—transitional rule for permanent incapacity benefits, etc. (a) a superannuation benefit (the trigger benefit) was paid to a person in the 2020‑21 income year or an earlier income year; and (c) the trigger benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; and (2) The Commissioner cannot amend an assessment on the basis that a superannuation benefit paid to the person is a superannuation income stream benefit because of the amendments made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 if: (iii) the superannuation benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (a) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (b) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. ## 301‑105 Transitional rules for Schedule 301‑105 Transitional rules for Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 (1) The Minister may, by legislative instrument, make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions) that: (a) relate to the amendments or repeals made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023; and (2) Without limiting subsection (1), rules made under this section before the end of the period of 12 months starting on the day that Schedule commences may provide that provisions of that Schedule, or any other Act or instrument, have effect with any modifications prescribed by the rules. Those provisions then have effect as if they were so modified. ## Division 302 Superannuation death benefits paid from complying plans etc. ## 302‑5 Extended application to certain fo 302‑5 Extended application to certain foreign superannuation funds (2) Division 302 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section after another person’s death, because the other person was a member of that fund, in the same way as it would apply if the payments were superannuation death benefits paid to you from a complying superannuation fund. ## 302‑195 Extended meaning of death benefi 302‑195 Extended meaning of death benefits dependant for superannuation income stream For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if: (b) just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. ## 302‑195A Meaning of death benefits depen 302‑195A Meaning of death benefits dependant for 2008‑2009 income year (2) For the purposes of Subdivision 82‑B of Division 82, Division 302 and section 303‑5 of the Income Tax Assessment Act 1997, the definition of death benefits dependant in section 302‑195 of that Act applies as if paragraphs (a) and (b) of the definition were replaced with the following paragraphs: (a) a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008 or a person who was formerly such a spouse; or (b) a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008, who is aged less than 18. ## Division 303 Superannuation benefits paid in special circumstances ## 303‑10 Superannuation lump sum member be 303‑10 Superannuation lump sum member benefit paid to member having a terminal medical condition (ii) a superannuation guarantee payment, a small superannuation account payment, an unclaimed money payment, a superannuation co‑contribution benefit payment or a superannuation annuity payment. (2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you at a time in the period: ## 303‑15 Superannuation lump sum member be 303‑15 Superannuation lump sum member benefit paid to member on compassionate ground relating to the coronavirus (i) a condition of release specified in item 107A or 207AA of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; or (ii) a condition of release specified in item 109AA of the table in Schedule 2 to the Retirement Savings Accounts Regulations 1997. ## Division 304 Superannuation benefits in breach of legislative requirements etc. ## 304‑15 Excess payments from release auth 304‑15 Excess payments from release authorities (1) This section applies to a superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with section 292‑80B. (2) The superannuation benefit is not assessable income and is not exempt income to the extent that it does not exceed the amount mentioned in subsection (3). (3) The amount is the amount of excess non‑concessional contributions stated in the release authority in accordance with paragraph 292‑80A(3)(a), reduced (but not below zero) by the amount of any superannuation benefit that was not assessable income and not exempt income under a previous operation of subsection (2) in relation to the release authority. (4) The superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3). ## Division 305 Superannuation benefits paid from non‑complying superannuation plans ## Subdivision 305 ‑B—Superannuation benefits from foreign superannuation funds ## 305‑80 Lump sums paid into complying sup 305‑80 Lump sums paid into complying superannuation plans post‑FIF abolition (a) you have an interest in a FIF (within the meaning of Part XI of the Income Tax Assessment Act 1936, as in force just before the commencement of item 37 of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010) (the paying fund); and (b) Subdivision 305‑B of the Income Tax Assessment Act 1997 applies in relation to the paying fund (see section 305‑55 of that Act); and (c) the paying fund transfers an amount to a complying superannuation fund in respect of you during the deduction year; and (d) you choose under section 305‑80 of the Income Tax Assessment Act 1997 that the amount, or part of the amount, is to be treated as assessable income of the complying superannuation fund; and (e) immediately before the transfer happens, there is a post‑FIF abolition surplus (within the meaning of the Income Tax Assessment Act 1936) for the paying fund in relation to you; and ## Division 306 Roll‑overs etc. ## 306‑10 Roll‑over superannuation benefit— 306‑10 Roll‑over superannuation benefit—directed termination payment For the purposes of the definition of specified roll‑over amount in the Income Tax Assessment Act 1997, treat the taxable component of a directed termination payment (within the meaning of section 82‑10F) as the element untaxed in the fund of a superannuation benefit that is a roll‑over superannuation benefit. ## Division 307 Key concepts relating to superannuation benefits ## 307‑125 Treatment of tax free component 307‑125 Treatment of tax free component of existing pension payments etc. (1) This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007. > Note: This section also applies to an income stream replacing an earlier one because of an involuntary roll‑over (see section 307‑127). (2) Despite subsection 307‑125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows: (a) first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007); (b) next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits. The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit. (3) Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened: (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day; (ba) the holder of the superannuation interest is aged 60 or above on 1 July 2007, if none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day. (a) treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and (b) work out the tax free component of the superannuation interest for the purposes of section 307‑125 of the Income Tax Assessment Act 1997 under subsections (6) and (6A). (i) an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and (ii) the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time; (b) next, work out the unused undeducted purchase price (within the meaning of paragraph (a) of the definition of that term in subsection 27A(1) of the Income Tax Assessment Act 1936 just before the commencement of this section, and disregarding paragraphs (b) and (c) of that definition) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007; (c) next, work out the pre‑July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this section) of the eligible termination payment. (a) at least one superannuation income stream benefit was paid from the superannuation income stream before 1 July 1994; or (b) section 27AAAA of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007) applied to the superannuation income stream just before 1 July 2007; (7) For the purposes of paragraph (6)(c), disregard the value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment. (8) If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as: (b) if 1 or more other events mentioned in subsection (3) happened before the commutation—the time just before the earliest of those events happens. ## 307‑127 Extension—income stream replacin 307‑127 Extension—income stream replacing an earlier one because of an involuntary roll‑over (a) references in that section to the later income stream (in relation to a time, or event happening, before the payment of that involuntary roll‑over superannuation benefit) include references to the earlier income stream; and (b) references in that section to the superannuation interest supporting the later income stream (in relation to a time, or event happening, before the payment of that benefit) include references to the earlier interest. ## 307‑230 Total superannuation balance—mod 307‑230 Total superannuation balance—modification for transfer balance just before 1 July 2017 (1) This section applies for the purposes of working out the amount of your total superannuation balance just before 1 July 2017. (2) The transfer balance mentioned in paragraph 307‑230(1)(b) of the Income Tax Assessment Act 1997 just before 1 July 2017 is taken to be equal to: (a) the sum of the transfer balance credits (if any) in your transfer balance account just after the start of 1 July 2017; less (b) the sum of the transfer balance debits (if any) arising in your transfer balance account on 1 July 2017 under item 4 of the table in subsection 294‑80(1) of that Act (about payment splits). ## 307‑231 Total superannuation balance—lim 307‑231 Total superannuation balance—limited recourse borrowing arrangements (1) Section 307‑231 of the Income Tax Assessment Act 1997 applies in relation to borrowings that arise under contracts entered into on or after 1 July 2018. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2018 is treated as if it arose under a contract entered into before 1 July 2018 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. ## 307‑290 Taxed and untaxed elements of de 307‑290 Taxed and untaxed elements of death benefit superannuation lump sums (a) treat a deduction made under former section 279 of the Income Tax Assessment Act 1936 as having been made under section 295‑465 of the Income Tax Assessment Act 1997 instead; and (b) treat a deduction made under former section 279B of the Income Tax Assessment Act 1936 as having been made under section 295‑470 of the Income Tax Assessment Act 1997 instead. ## 307‑345 Low rate component—Effect of reb 307‑345 Low rate component—Effect of rebate under the Income Tax Assessment Act 1936 If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007‑2008 income year is, despite subsection 307‑345(1), the total of: (b) the amount by which $140,000 exceeds the upper limit for the 2006‑2007 income year (worked out under section 159SG of that Act). ## Part 3 ‑32—Co‑operatives and mutual entities (a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and (2) Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001 (the new Act) applies to the plant on this basis: (a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant’s opening adjustable value; and (b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and (c) if you excluded an amount from your assessable income under section 42‑290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999—the cost of the plant, and its opening adjustable value, are reduced by that amount; and (d) if subparagraph (1)(b)(ii) applies to you—you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi‑owner of the plant under the former Act continue. (3) If you were using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis: (a) for the diminishing value method—replace the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate you were using; and (i) replace the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate you were using; and (ii) increase the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note 1: Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced. > Note 2: Small business entities can choose to work out the decline in value of their depreciating assets under Division 328. (a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or (3) If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40‑70(1) or 40‑75(1) of the new Act that includes the plant’s effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and (2) For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets. (3) For a case where the plant is merged into another depreciating asset, section 40‑125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it. (b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and (a) you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and (b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU’s opening adjustable value. (1) Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001. (2) For a unit of software for which you were deducting amounts under Subdivision 46‑B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis: (d) you must use the same effective life you were using under Subdivision 46‑B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001. (1) This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day. (b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and (c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and (1) This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001. > Note: Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8). (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330‑80 of the former Act for your income year ending on 30 June 2001; and (c) in applying the formula in section 40‑75 of the new Act for the income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The remaining effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these: (i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and (ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (7) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and (b) the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of expenditure incurred in carrying on eligible quarrying operations—the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (i) you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day) after 30 June 2001; or (ii) the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day) after 30 June 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which the start day occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year. there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (1) This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330‑H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and (c) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (i) any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset); (i) any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (4) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (4) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (b) the expenditure would have been transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330‑H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for your income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (1) Despite subsections 40‑35(5), 40‑38(5) and 40‑40(4), there is no additional decline in the value of the notional asset referred to in those subsections if: (a) apart from this section, subsection 40‑35(5), 40‑38(5) or 40‑40(4) would apply because the real asset referred to in that subsection is disposed of; and (a) at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373‑35 of the former Act; and (b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day. (a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and (1) Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time). (2) Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time. (a) you have deducted or can deduct an amount under Subdivision 387‑G of the former Act for an amount (the qualifying amount) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and (b) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and (1) This section applies to you if you have deducted or can deduct an amount under Subdivision 400‑A of the former Act for an amount (the qualifying amount) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400‑A of the former Act. (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and (c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400‑15(3) of the former Act; and (1) Units of plant that you had allocated to a pool under Subdivision 42‑L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act. (a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and (c) in applying the formula in section 40‑70 of the new Act for your income year in which 1 July 2001 occurs—it has a base value equal to that opening adjustable value; and (d) you replace the component in the formula in subsection 40‑70(1) of the new Act that includes an asset’s effective life with the pool percentage you were using for the pool; and (e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40‑115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and (f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset. (3) An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item). > Note 1: You work out the decline in value of an item removed under this subsection under Subdivision 40‑B of the new Act, using the cost for it worked out under section 40‑205 of the new Act. (b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset. (2) The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year) in this way: (a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and (b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section. (a) for a unit of plant (including IRUs and expenditure on software that is not pooled)—its undeducted cost at the end of 30 June 2001; or (b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence—the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or (c) for transport capital expenditure—the entity’s amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or (d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (e) for expenditure on evaluating the impact on the environment of a project—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (f) for assets that were pooled under Subdivision 42‑M or 42‑L of the former Act—the closing balance of the pool at the end of 30 June 2001. (4) The asset’s base value for applying the formula in section 40‑70 of the new Act for the diminishing value method is that opening adjustable value. (5) The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an item of plant for which you were using the prime cost method—using the rules in section 40‑10 of this Act; and (c) for a unit of software for which the entity was deducting amounts under Subdivision 46‑B of the former Act—using the rules in subsection 40‑25(2) of this Act; and (f) for an amount of expenditure on evaluating the impact on the environment of a project—using the rules in section 40‑55 of this Act. (6) The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an amount of unrecouped expenditure under Division 330 of the former Act—using the rules in section 40‑35 of this Act; and (b) for an amount of transport capital expenditure under Division 330 of the former Act—using the rules in section 40‑40 of this Act; and (7) The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act. (a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑C of the former Act; or (b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑H of the former Act; or (c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387‑B of the former Act; or (d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; or (e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365. (9) The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001. (10) You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount). (11) You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount. (1) Subsections 40‑65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened: (b) you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act. (a) paragraph 40‑65(6)(a) of the Income Tax Assessment Act 1997 included both events set out in subsection (1) of this section; and (b) subsections 40‑65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events. (1) A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936. (2) An amount you have deducted or can deduct for a water facility under Subdivision 387‑B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40‑F of the new Act. (3) A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936. (a) you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40‑115 (about splitting a depreciating asset) or 40‑125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and (b) it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40‑72 of that Act; (2) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if: (c) it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40‑72 of that Act. (3) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset) before 10 May 2006 if: (b) the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and (d) it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40‑72 of that Act. (a) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you: (b) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001. (2) If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act. (3) Otherwise, Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section. (a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or (b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or (ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life. (1) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001. > Note: If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40\. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997. (1A) Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001. (1B) Subsection (1) applies to a mining, quarrying or prospecting right (the new right) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if: (i) the other company is a member of the same wholly‑owned group as the original holder and was a member of that group just before that day; and (ii) the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer. (1D) Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if: (b) the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001. (a) you acquired, under an interest realignment arrangement, an interest (a new interest) in a mining, quarrying or prospecting right; and (b) the interest was acquired in exchange for one or more other interests (old interests) in other mining, quarrying or prospecting rights; and Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001. (a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or (b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership; the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act. (3) An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that: (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act. (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act. (6) Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243. (7) An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if: (a) you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and (8) The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section. (c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act. (2) Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001. A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act. if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011. (2) The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011. (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset for an income year is the amount worked out under section 40‑130 if: (a) the income year is the year in which you start to use the asset, or have it installed ready for use, for a taxable purpose; and (b) subsection (2) (about businesses with turnover less than $500 million) applies to you for the year and for the income year in which you started to hold the asset (if that was an earlier year); and > Note 1: An effect of paragraph (1)(a) is that this Subdivision only applies to one income year per asset. See also subsection 40‑135(1). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $500 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. Exception—assets for which the decline in value is worked out under section 40‑82 or Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (3) However, this section does not apply to a depreciating asset for an income year if you work out the decline in value of the asset for the income year under any of the following: (1) For the purposes of paragraph 40‑120(1)(c) and section 328‑182, you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you: > Note: Section 328‑182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997. (i) entering into a contract under which you hold the post‑12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑12 March 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post‑12 March 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (8) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (9) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (10) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (1) For the purposes of section 40‑120, the decline in value for the income year in which paragraph 40‑120(1)(a) is satisfied (the current year) is: > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 12 March 2020 to 30 June 2020 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2020 to 30 June 2021. (a) 50% of the asset’s cost as at the end of the current year, disregarding any amount included in the second element of the asset’s cost after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997, assuming its cost were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (3) However, the amount worked out under subsection (2) for an income year cannot be more than the amount that is the asset’s cost for the year. (a) 50% of the sum of the asset’s opening adjustable value for the current year and any amount included in the second element of its cost for that year, disregarding any amount included in that second element after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997 assuming: (ii) for the prime cost method—the component “Asset’s \*cost” in the formula in subsection 40‑75(1) of that Act (as adjusted under that section) were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (b) for the prime cost method—the sum of its opening adjustable value for the income year and any amount included in the second element of its cost for that year. (1) The decline in value of a depreciating asset is not worked out under this Subdivision for an income year if this Subdivision already applied in working out the decline in value of the asset for an income year. (2) For an income year later than the year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (3) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (4) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) You may choose that the decline in value of a particular depreciating asset for an income year, and subsequent income years, is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the first income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. If this Subdivision applies to work out the decline in value of a depreciating asset you hold for an income year, no other provision of this Act or the Income Tax Assessment Act 1997 applies to work out that decline in value. (1) For the purposes of this Subdivision, you are covered by this section for a depreciating asset if, on or before 30 June 2023: (2) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (3) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or Exception—assets for which the decline in value is worked out under Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (a) the asset is allocated to a low‑value pool, or expenditure on the asset is allocated to a software development pool (see Subdivision 40‑E of the Income Tax Assessment Act 1997); or (b) you or another taxpayer has deducted or can deduct amounts for the asset under Subdivision 40‑F of the Income Tax Assessment Act 1997 (about primary production depreciating assets). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $5 billion; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this section. (ii) if the 2019‑20 income year ends on or before 6 October 2020—the sum of your ordinary income (if any) and statutory income (if any) for the 2019‑20 income year; and (c) the sum of the amounts worked out under subsection (3) for the 2016‑17, 2017‑18 and 2018‑19 income years exceeds $100 million. (b) next, work out the cost of each of those assets (including any amounts included in the second element of the asset’s cost at a time that is in the income year); (4) For the purposes of subsection (3), disregard an asset if, at the time you first used the asset, or had it installed ready for use, for a taxable purpose: (a) it was not reasonable to conclude that you would use the asset principally in Australia for the principal purpose of carrying on a business; or (5) For the purposes of paragraph (3)(b), to work out the cost of a depreciating asset that is capital works (see section 43‑20 of the Income Tax Assessment Act 1997): (a) disregard section 40‑45 of that Act and work out the cost of the capital works using Subdivision 40‑C of that Act; and (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under subsection (3) if: (a) where section 40‑155 covers you for the current year (regardless whether section 40‑157 also covers you for the current year)—an exclusion applies to you and the asset for the current year under section 40‑165 (about exclusions for businesses with turnover of $50 million or more); or (ii) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s start time occurs in the current year—the asset’s cost as at the end of the current year, disregarding any amount included in the asset’s cost after 30 June 2023; or (b) if the asset’s start time occurred in an earlier year—the sum of its opening adjustable value for the current year and any amount included in the second element of its cost for the current year, disregarding any amount included in the asset’s cost after 30 June 2023. > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 6 October 2020 to 30 June 2021 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2021 to 30 June 2022. (a) where paragraph 40‑160(2)(a) applies—section 40‑155 would not cover you for the income year if the reference in that section to $5 billion were instead a reference to $50 million; and (i) entering into a contract under which you hold the post‑6 October 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑6 October 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of satisfying paragraph 40‑160(1)(a) for the post‑6 October 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you already satisfied paragraph 40‑160(1)(a) of this Act for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (9) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (1) For the purposes of subsections 40‑160(2) and 40‑170(1A), an exclusion applies to you and an asset for an income year if any of the exclusions in this section applies in relation to the asset. (4) This exclusion applies in relation to the asset if the asset is available for use, at any time in the income year, by any of the following: (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under this section if: (ii) you started to use the asset, or have it installed ready for use, for a taxable purpose in an earlier income year; and (b) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under section 40‑82 of the Income Tax Assessment Act 1997—the amount worked out under subsection (3); or (b) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under Subdivision 40‑BA of this Act—the amount worked out under subsection (4); or Assets affected by section 40‑82 of the Income Tax Assessment Act 1997 (about assets costing less than $150,000, medium sized businesses) (a) the amount that would be the asset’s decline in value for the year under section 40‑82 of the Income Tax Assessment Act 1997, assuming the reference in subparagraph 40‑82(3A)(b)(ii) of that Act to 31 December 2020 were instead a reference to the 2020 budget time; and (a) the amount that would be worked out under paragraph 40‑130(2)(a) or (4)(a) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(a) and (4)(a) to 30 June 2021 were instead references to the 2020 budget time; and (c) the amount that would be worked out under paragraph 40‑130(2)(b) or (4)(b) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(b) and (4)(b) to “the amount worked out under paragraph (a)” were instead references to “the amounts worked out under paragraphs 40‑170(4)(a) and (b)”. (a) the amount that would be the asset’s decline in value for the year under Division 40 of the Income Tax Assessment Act 1997, disregarding any amounts included in the eligible second element worked out under section 40‑175 of this Act for the asset for the year; and The amount worked out under this section (the eligible second element) for a depreciating asset for an income year is the sum of any amounts included in the second element of the asset’s cost at a time that is in both of the following periods: (1) For an income year later than a year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (2) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (3) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) This section applies if the decline in value for a depreciating asset for an income year is worked out under this Subdivision, and at a time (the balancing adjustment time) in a later income year: (i) it becomes not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (b) none of the requirements in paragraphs 40‑295(1)(a), (b) or (c) of the Income Tax Assessment Act 1997 are satisfied in relation to the asset. (2) For the purposes of Subdivision 40‑D of the Income Tax Assessment Act 1997 assume that, at the balancing adjustment time, you stop using the asset, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again. (3) For the purposes of section 40‑180 of the Income Tax Assessment Act 1997 assume that the reference in item 3 of the table in subsection 40‑180(2) of that Act to “because you stop using it for any purpose expecting never to use it again” were instead a reference to “because of section 40‑185 of the Income Tax (Transitional Provisions) Act 1997”. (4) If a balancing adjustment event happens to a depreciating asset you hold because of this section, this Subdivision cannot apply to work out the decline in value of the asset for a later income year. (1) You may choose that the decline in value of a particular depreciating asset for an income year is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year. (1) Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40. (a) you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset: (ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and (4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day. (5) The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if: (i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or (ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and  > sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose. (7) Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens: (a) if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b). (i) an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and (ii) the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and (3) The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount. (a) on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and (c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and (ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal; (2) There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal. (3) Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount. If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997. (a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and (b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and: (i) the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, the R&D entity is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—a clawback amount under section 355‑447 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑466 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. (b) section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions. > Note 2: The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and: (i) the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset; (ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, an R&D entity (the partner) that is a partner in the R&D partnership and is entitled to one or more new law deductions for one or more income years for the asset, is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—a clawback amount under section 355‑449 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑468 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s new law deductions mentioned in paragraph (2)(b) of this section. (4) Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event. > Note: Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions. (1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant. (b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and (3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it. (a) there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and (b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act. (2) The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor. (3) The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and <table cellspacing="0" cellpadding="0" style="width:364.2pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:353.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading" style="page-break-inside:avoid"><span>Conditions for small business taxpayers retaining accelerated rates</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Condition</span></p></td></tr></thead><tbody><tr><td style="width:21.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:321.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>The transferee must have been a small business taxpayer for the income year (the </span><span style="font-weight:bold; font-style:italic">start year</span><span>) that includes the time when the entity first used the plant, or first had it installed ready for use.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>2</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>At that time, neither of these applies:</span></p><p class="Tablea"><span>(a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;</span></p><p class="Tablea"><span>(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection</span><span> </span><span>(5).</span></p></td></tr></tbody></table> ``` (4) For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership. (5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement. (a) for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or (i) replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and (ii) increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).  (b) if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11). (c) that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and (d) that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and (e) that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity. (a) for taxable supplies (if any) the entity makes during the year in the course of carrying on a business—the value (as defined by section 9‑75 of the GST Act) of the supplies; and (b) for other supplies the entity makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies. (1) The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for: (a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (c) for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or (d) for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant. (3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115. (4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain. (5) Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee. (i) the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or (a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and (1) A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act. (2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year. For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if: Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act. (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset): and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply. (i) for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or (ii) for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and (c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act. (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and (2) Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act. The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under: (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on: (2) You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act. (3) A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under: (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and (2) Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act. A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act. The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001. If: (d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act; (a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and (a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and (b) the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and (c) paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997. Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years. (1) For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section. (b) the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (b) that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (1) There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea" style="page-break-after:avoid"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a); and</span></p><p class="Tablea" style="page-break-after:avoid"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (b) disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (f) an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division. (4) If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45‑5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest. (5) If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45‑10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest. Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Disregard the use of the following amounts in determining (for the purposes of Subdivision 50‑A of the Income Tax Assessment Act 1997 whether a fund established before 1 July 1997 operates and pursues its purposes in Australia: Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years. (2) However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date. Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if: (b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time. Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years. 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years (1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act. <table cellspacing="0" cellpadding="0" style="margin-left:56.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:258.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Application provisions for specific sections</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-size:9pt; font-weight:bold">Item</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">This section of the </span><span style="font-size:9pt; font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-size:9pt; font-weight:bold"> ...</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">Applies as described in this provision of this Act ...</span></p></td></tr></thead><tbody><tr><td style="width:24.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55(1)</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>95</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>8</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td></tr></tbody></table> ``` (a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and (b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997. > Note: Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year. (b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997; sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997). > Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock. (3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997. (a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and (b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936; > Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal. #### 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997. (1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year. (2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936. (3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year: (a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners; (b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed. > Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year. > Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year. (b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year; the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year. (2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. (3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2). #### 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997. #### 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business (1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. (2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity. > Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997. (1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. (2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value. > Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997. #### 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year. (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. > Note: Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. > Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given). (5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act). (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment. > Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%. (5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%. (6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.  > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section. (b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4). Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age. Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later. Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies. Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3. (4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997. (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%. > Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986. (5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D. > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. (a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and (b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year). (3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and (2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual: (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income. > Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F. > Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997. > Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997. #### 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 (1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012. (2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies. (3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act. (b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009. (2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if: (i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest; (iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or (i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest; (iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009. (2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time. (4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2): (a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and (b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being: (ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and (c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and (d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if: (i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or (ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and (e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and (i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and (ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and (g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest. (a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced: (i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or (ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and (b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5. (2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right. (3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right. (2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. (3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section. Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years. (1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision. > Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision). > Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936). > Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997. (a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936. (1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936. (2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997. > Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997. (3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and (d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; (f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time. > Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and (d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015. (a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or (4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if: (b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset. The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year. (a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and (1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied: (b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and (d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works). (3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936. Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936. (b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006. (2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement. > Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement. Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual: (b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her. 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act (1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee). (2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year: (3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection. #### 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997. Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936). (2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if: (a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; (a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011); (b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986. > Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section. If: (a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and (b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936; Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995. (1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997. (2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997. (3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997. (4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997. > Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one. Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year: (a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and (b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year; the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation. Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset. (b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section); > Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply. (1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if: (a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and (2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value. (4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value. (a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997. (2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less. (1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936: (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. (1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if: (2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by: (a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or (a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or (2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period. Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year: If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997. (1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002. (2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset. (3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required. (i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and (ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and (c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and (f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997). (a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or (1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:  > total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part. (a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or (2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section. (3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1). (1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences. > Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997. (c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets). (4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act. (5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act. Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement. (a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and (2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time. (a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and (ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs. (2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer. (a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and (b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest; (2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event. (3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly. (4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly. <table cellspacing="0" cellpadding="0" style="width:362.55pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:351.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Creating a CGT asset</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">CGT event number</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Applicable amount</span></p></td></tr></thead><tbody><tr><td style="width:50.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D1</span></p></td><td style="width:290.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the incidental costs the originating company incurred that relate to the CGT event</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D2</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the option</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D3</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the right</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>F1</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred on the grant, renewal or extension of the lease</span></p></td></tr></tbody></table> ``` (5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day. A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision. (a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996. (b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. (b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend. (3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities. (1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company. (2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred. (3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company. (1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of: (2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of: (3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note. (1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised. (b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and (ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act. You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and (b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996. (c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and (c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over. (3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. (a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and (c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and (d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act. (3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division. Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years. A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: (1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day. (2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice. (a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and (b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and (a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and (b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and (c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group. (5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004. (6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection. (1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss): (b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions); and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time: (i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or (e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and (f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and (ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred; (2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if: (a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these: (i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset; (ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and (3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act. (a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and (b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section. (5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of: (a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and (b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset. Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. (ii) that could have been deducted, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the deduction had not been limited by the company’s income for that income year; and (ii) that could have been applied, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the application of the loss had not been limited by the company’s capital gains for that income year. 170‑C Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred #### 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years. #### 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). #### Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997. Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997. If: (a) all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (d) that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and (e) the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place. Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years. > introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament. Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day. #### Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting #### 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B. (1) The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day. (2) No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted. #### 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting (1) Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if: (a) the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and (b) none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount. (2) No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount. (1) This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account. (2) For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. > Note 2: If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60. (3) For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)). (4) For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. (5) The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if: (a) during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and (b) the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section. (a) the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and (b) during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components. (7) For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. (8) Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it: (b) the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component. (9) Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component. (10) For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002: (b) lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination; (c) a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination); (e) the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination); (f) the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination). Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period: 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows: (a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and (i) in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and (ii) in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. > Note: A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002. #### 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002: (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:23.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:87.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A franking surplus</span></p></td><td style="width:220.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.009.png" width="175" height="58" alt="Start formula Amount of the class A franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.010.png" width="190" height="56" alt="Start formula Amount of the class B franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.011.png" width="190" height="56" alt="Start formula Amount of the class C franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` #### 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus): (a) a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Original surplus</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:85.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>class A</span></p></td><td style="width:220.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.012.png" width="169" height="38" alt="Start formula Amount of the original class A surplus times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.013.png" width="169" height="38" alt="Start formula Amount of the original class B surplus times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.014.png" width="169" height="38" alt="Start formula Amount of the original class C surplus times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (4) If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit): (a) a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company. (5) The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking deficit into 1997 Act franking debit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Original deficit</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking debit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(4)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:70.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A</span></p></td><td style="width:235.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.015.png" width="164" height="38" alt="Start formula Amount of the original class A deficit times start fraction 39 over 61 end fraction end formula "></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.016.png" width="164" height="38" alt="Start formula Amount of the original class B deficit times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.017.png" width="164" height="38" alt="Start formula Amount of the original class C deficit times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (2) A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if: (c) the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions. (3) The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if: (b) the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and (1) While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit. (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year. (3) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: > Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act. (1) The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account. (a) a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time; (3) If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if: (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity. #### 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If: the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time. (1) Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections. (2) If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year. Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year. Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year. (5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in: that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement. (6) The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (7) The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (2) The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (3) The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (i) are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and (a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and (b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section. (a) whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and (1) This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002. (a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and (3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded. (1) This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002; (2) If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (3) If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (4) If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. (5) If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows: (a) any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and (i) in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and (ii) in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. #### 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF.  #### 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act). (2) If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus): (a) a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF. (4) If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit): (a) a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF. This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period). (1) The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period: (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (1) The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period. (2) The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner. (3) The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5. (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and (d) the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner; the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received. (3) A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time: (1) A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends. (2) However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period. (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (a) the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed: (d) the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and (e) the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return. (2) The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day. (1) The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period. (2) The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made. Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period. (b) on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax); the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed: (c) the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and (d) the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return. (2) The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day. The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period: If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day. If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and If: (a) a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and (b) the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment; In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment. If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment. The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with. If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953. (1) Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period. (a) the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and (b) the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3); the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on: (c) if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or If: Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax. Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division. If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997. (a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day: (3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002. (a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002: > Note: As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date. (b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997. In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003. (1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year. (a) a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of: (i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time; (iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period; (2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if: (b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time: (ii) the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. > Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. > Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. (7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table: <table cellspacing="0" cellpadding="0" style="width:365.35pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount of the franking credit and the exempting debit</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">If:</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the credit and debit is:</span></p></td></tr></thead><tbody><tr><td style="width:22.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The period starts immediately after 7.30</span><span> </span><span>pm by legal time in the Australian Capital Territory on 13</span><span> </span><span>May 1997</span></p></td><td style="width:141.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Both these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was not in surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>All these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was in surplus at the start of the period;</span></p><p class="Tablea"><span>(c) the surplus in the account at the switch time is greater than the surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the franking surplus in the Australian company’s franking account at the switch time; and</span></p><p class="Tablea"><span>(b) the franking surplus in the Australian company’s franking account at the start of the period</span></p></td></tr></tbody></table> ``` (a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and (b) the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period. Subdivision 235‑I of the Income Tax Assessment Act 1997 applies to assets acquired by the trustee of an instalment trust in: (1) Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years. (2) However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time). (3) The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997. Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997. (2) Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in: (1) Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that: (b) is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose. (a) if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007. > Note: To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997. (b) contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option; the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option. (3) For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5). (4) If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is: (a) the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less (b) the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest. (5) If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is: (6) If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil. (1) If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one. (2) If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year. (3) If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year. (a) for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and (b) for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year: Step 1. Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. Step 2. Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3). Step 3. If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year. > Note: Example: Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75): (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred: (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times: (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate. Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008. (a) the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and (b) the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities: (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (i) the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or (ii) the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and (f) none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made: (i) Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event; (ii) a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year. (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (b) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (c) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year #### 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year (a) the requirements set out in paragraphs 275‑610(1)(a), (b) and (c) of the Income Tax Assessment Act 1997 are satisfied in respect of an amount of non‑arm’s length income of a managed investment trust in relation to an income year; and (b) the managed investment trust became a party to the scheme mentioned in paragraph 275‑610(1)(a) of that Act before the day on which the Bill that became the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 was introduced into the House of Representatives; and Division 276 of the Income Tax Assessment Act 1997 as inserted in that Act by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (the amending Act) applies as set out in subitem 1(1) of Schedule 8 to the amending Act. (b) if the trustee of the trust has made a choice for the purposes of paragraph 1(1)(b) of Schedule 8 to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016—the first income year starting on or after 1 July 2015; or (c) if the trustee of the trust has made a choice for the purposes of subparagraph 276‑10(1)(e)(i) of the Income Tax Assessment Act 1997 in respect of the 2016‑17 income year—that income year. (c) the trust is an AMIT for an income year (the discovery year) that is the starting income year or a later income year. (1) This section applies if the trust has an under or over of a character in the discovery year relating to the base year. (b) if, at a time, the trust sent its members distribution statements for an income year that is prior to the starting income year—assume that the trust sent those members AMMA statements for that income year at that time. (3) For the purposes of Division 276 of the Income Tax Assessment Act 1997, treat the under or over mentioned in subsection (1) as an under or over of the AMIT, in the discovery year relating to the base year, of the character mentioned in that subsection. (a) had the under or over mentioned in subsection (1) been discovered before the starting income year, this Act would have operated to produce a particular effect (the pre‑AMIT scheme effect) for the base year in relation to the amount or amounts reflected in the under or over; and 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT #### 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT (b) working out the amount (if any) of the entity’s capital gain under subsection 104‑70(4) of the Income Tax Assessment Act 1997. (3) For the purpose of working out the amount of the non‑assessable part mentioned in paragraph 104‑70(1)(b), treat the following provisions as being in operation at the time the payment was made: (b) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in paragraph (a). (4) Subsection (3) does not apply to the extent (if any) that the entity, in the income tax return that it lodged for the income year in which the payment was made, included the amount of the payment in its assessable income for that income year. (5) For the purposes of section 118‑20 of the Income Tax Assessment Act 1997, treat this section as being in Part 3‑1 of that Act. (2) The Commissioner cannot amend the entity’s assessment for the income year in which the payment was made in a particular way if: (b) the Commissioner could not amend the assessment in that way if the following provisions were in operation at the time the payment was made: (ii) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in subparagraph (i); and Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82‑10F). (2) The object of this section is to apply (with modifications) provisions limiting deductibility in respect of certain contributions made during the period that: (a) Subdivisions AA and AB of Division 3 of Part III of the Income Tax Assessment Act 1936, as in force just before they were repealed by the Superannuation Legislation Amendment (Simplification) Act 2007; (b) any other provision of the Income Tax Assessment Act 1936, or of any instrument made under that Act, to the extent that it relates to the operation of those Subdivisions; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of those Subdivisions. (b) the deduction limit mentioned in section 82AAC for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (c) the deduction limit mentioned in section 82AAT for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (d) Division 290 of the Income Tax Assessment Act 1997 did not apply to contributions made during the income year mentioned in paragraph (a). (2) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of a defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection and subsection (4), the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 5 September 2006; (b) the defined benefit interest mentioned in paragraph (2)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 5 September 2006, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (2)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (4) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of the defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection, the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 12 May 2009; (b) the defined benefit interest mentioned in paragraph (4)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 12 May 2009, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (4)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (1) The object of this section is to apply (with modifications) provisions relating to excess non‑concessional contributions tax in respect of certain contributions made during the period that: (b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision. (ea) in a case where paragraph 292‑95(1)(b) of that Act would have allowed the contribution mentioned in that paragraph to be made at a time within that period—that paragraph allowed the contribution to be made on or before 30 June 2007; and (f) paragraph 292‑95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and (fa) in a case where subsection 292‑100(2), (4), (7) or (8) of that Act would have allowed the contribution mentioned in that subsection to be made at a time within that period—that subsection allowed the contribution to be made on or before 30 June 2007; and (g) paragraph 292‑100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and (h) contributions made during that period that are covered under section 292‑100 of that Act reduce the person’s CGT cap amount for the 2007‑2008 financial year in accordance with subsection 292‑105(2) of that Act (and despite subsection (1) of that section); and (i) if the conditions in subsection (4) are satisfied—the person’s excess non‑concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and (b) the Commissioner gives the person a transitional release authority under subsection 292‑80A(2) in response to the application; and (c) the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292‑80B within 21 days after the date of the release authority; and (d) the superannuation provider pays the person the amount required under section 292‑80C in relation to the transitional release authority. (b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act). (6) The amount to be included in the first person’s amount of non‑concessional contributions under subparagraph (3)(b)(ii) is the sum of: (a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and (b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made. (c) under Division 295 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)), the contribution is included in the assessable income of the superannuation provider in relation to the superannuation plan to which the contribution is made; and (8) For the purposes of paragraph (7)(b), treat the person as an employee of the other entity if the person would be treated as an employee of the other entity under Division 290 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)). (1) A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007. (2) The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292‑80(3)(b)(i), the person would have excess non‑concessional contributions for the financial year mentioned in paragraph 292‑80(3)(a). (4) For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out: The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 21 days after the date of the release authority. (1) A superannuation provider that has been given a transitional release authority in accordance with section 292‑80B must pay to the person within 30 days after receiving the release authority the least of the following amounts: (a) if the person requests the provider in writing to pay a specified amount in relation to the release authority—that amount; (c) the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person in complying superannuation plans. > Note 1: Section 288‑95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection. > Note 2: Section 288‑100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority. > Note 3: For reporting obligations on the superannuation provider in these circumstances, see section 390‑65 in Schedule 1 to the Taxation Administration Act 1953. (2) The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person in complying superannuation plans. (3) Section 307‑125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section. (a) your non‑concessional contributions cap for the 2015‑2016 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsection 292‑85(7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 applies after the commencement of this section as if: (d) subsection 292‑85(6) of that Act as so amended had been applied (taking into account paragraph (c) of this subsection) for the purposes of working out your non‑concessional contributions cap for the 2016‑2017 financial year. (2) For the purposes of working out your non‑concessional contributions caps for the 2017‑2018 financial year and the 2018‑2019 financial year, if: (a) your non‑concessional contributions cap for the 2016‑2017 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsections 292‑85(6) and (7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 apply after the commencement of this section as if the amount worked out under subsection 292‑85(5) of that Act as so amended were $380,000. (3) To avoid doubt, this section does not affect your non‑concessional contributions cap for any financial year that ended before 1 July 2017. The tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your non‑concessional contributions (see section 292‑90 of the Income Tax Assessment Act 1997) for the financial year. (2) Subject to section 294‑55, the amendments of Division 294 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Treasury Laws Amendment (2017 Measures No. 2) Act 2017 apply on and after 1 July 2017. Despite sections 294‑30 and 294‑140 of the Income Tax Assessment Act 1997 (which are about when you have excess transfer balance), you do not have excess transfer balance in your transfer balance account on any day in the period of 6 months beginning on 1 July 2017 if: (a) the only transfer balance credits in the account in that period arose under item 1 of the table in subsection 294‑25(1) of that Act (which is about superannuation income streams you have just before 1 July 2017); and (b) the sum of those transfer balance credits exceeds your transfer balance cap, but is less than or equal to $1,700,000; and (c) at the end of the period, the sum of all the transfer balance debits arising in your transfer balance account equals or exceeds the amount of the excess from paragraph (b). (1) Despite subsection 294‑10(2), a transfer balance credit arises under item 4 of the table in subsection 294‑25(1) of the Income Tax Assessment Act 1997 only in relation to a borrowing that arises under a contract entered into on or after 1 July 2017. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2017 is treated as if it arose under a contract entered into before 1 July 2017 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) on 1 July 2017, a transfer balance debit arose in your transfer balance account under item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997; and (b) the sum of all the transfer balance credits that arise in your transfer balance account under item 1 of the table in subsection 294‑25(1) of that Act exceeds the amount that would, apart from this section, be the amount of that debit. (2) Despite column 2 of item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997, the amount of the transfer balance debit is instead equal to the sum worked out under paragraph (1)(b) of this section. 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain > The object of this Subdivision is to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the following legislative changes: (a) the introduction of a transfer balance cap (as a result of Schedule 1 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016); (b) the exclusion of transition to retirement income streams (and similar income streams) from being superannuation income streams in the retirement phase (as a result of Schedule 8 to that Act). (a) starting on the start of the day on which the Bill that became the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 was introduced into the House of Representatives; and (a) at the start of the pre‑commencement period, a CGT asset of a fund is a segregated current pension asset of the fund; and (i) at a time (the cessation time) in the pre‑commencement period, the asset ceases to be a segregated current pension asset of the fund; or (ii) at the start of 1 July 2017 (also the cessation time), the asset ceases to be a segregated current pension asset of the fund because it supports a superannuation income stream covered by subsection 307‑80(3) of the Income Tax Assessment Act 1997; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (b) the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year is greater than nil; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and #### 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑115(3)(a), the fund makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the fund’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Subsection 295‑390(1) of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). > 2016‑17 non‑exempt proportion means 1 minus the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year. #### 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset (i) the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997 in respect of the trust for the 2016‑17 income year; (ii) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year; and (d) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and #### 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑125(3)(a), the trust makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the trust’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Section 295‑400 of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). (a) unless paragraph (b) applies—1 minus the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997; or (b) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage worked out by subtracting the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year from 100%. This Subdivision applies to an entity that is the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust. For the purposes of this Subdivision, an asset is a 30 June 1988 asset of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust if the entity owned it at the end of 30 June 1988. > Note: Section 295‑90 of the Income Tax Assessment Act 1997 treats these assets as having been acquired on 30 June 1988. (1) The first element of the cost base of each 30 June 1988 asset of the entity’s is the greater of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). (2) The first element of the reduced cost base of each 30 June 1988 asset of the entity’s is the lesser of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). the market value of the asset as at the end of 30 June 1988 is the average of the highest and lowest trade prices for identical assets recorded on 30 June 1988 in whichever of the following markets is applicable: (d) if, on that date, there was a State capital city market (other than the Sydney market) that recorded a higher volume of trading than the Sydney market in identical assets—that State capital city market; (2) For the purposes of this section, an asset is taken to have been listed on an Australian stock exchange on 30 June 1988 if, and only if, on that day the asset had the status of having been granted official quotation by a securities exchange within the meaning of the former Securities Industry Act 1980 or the law of a State or Territory corresponding to that former Act. (b) at any time during the period commencing at the time when the shares were acquired and ending at the end of 30 June 1988, the company paid an amount that was not a dividend to the entity in respect of the shares; (b) at any time during the period commencing at the time when the interest or unit was acquired and ending at the end of 30 June 1988, the trustee of the trust paid an amount to the entity in respect of the interest or unit, being: (i) in a case where the entity was exempt from tax for the year of income in which the payment was made—an amount that, if the entity had not been exempt from tax, would not have been the entity’s assessable income; or the cost base to the entity of the interest or unit as at 30 June 1988 is reduced by so much of the amount as is not attributable to a deduction allowed under former Division 10C or 10D of the Income Tax Assessment Act 1936. (1) Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (2) and (3) of this section apply if an entity exercises rights or options as mentioned in that section to acquire: (b) the greater of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (b) the lesser of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (4) The payment referred to in subsection (2) or (3) can include giving property. To the extent that the payment does, use the market value of the property in working out the amount of the payment. (1) A notice given under subsection 82AAT(1A) or (1CB) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑170 of the Income Tax Assessment Act 1997. (2) A notice given under subsection 82AAT(1C) or (1CD) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑180 of the Income Tax Assessment Act 1997. (1) A proportion of the ordinary income and statutory income of a continuously complying fixed interest ADF of an income year that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).  > Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the income year. > Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the income year. (4) A choice for the purposes of the definition of reckoning time in subsection (5) must be made on or before the date of lodgment of the income tax return of the ADF for the income year to which the choice relates, or before a later day allowed by the Commissioner. > continuously complying fixed interest ADF, in relation to an income year (the current year), means a fund that is a fixed interest complying ADF in relation to each of the following years: > current 25 May balance, in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time: (b) subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 September 1989 is to be added to the balance; (b) a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that day, made a deposit with the ADF that consisted wholly or partly of the roll‑over (as defined in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 as in force on that day) of an eligible termination payment as so defined, being an eligible termination payment that included a concessional component (as so defined). > fixed interest complying ADF, in relation to a year of income, means a complying ADF where both of the following conditions are satisfied: (a) not less than 90% of the amount that, apart from this section, would be the assessable income of the ADF of the income year (other than non‑arm’s length income or amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997) consists of any one or more of the following: (ii) any profit arising on the disposal, redemption, cancellation or maturity of a CGT asset referred to in paragraph 295‑85(3)(b) of the Income Tax Assessment Act 1997; (iii) an amount included in assessable income under Division 16E of Part III of the Income Tax Assessment Act 1936 (or would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply); (ii) virtual PST life insurance policies (as defined in the Income Tax Assessment Act 1997) issued by a life insurance company. > original 25 May balance, in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988. > reckoning time, in relation to an ADF in relation to an income year, means the beginning of the income year, or such other time during the income year as the ADF chooses in accordance with subsection (4). (6) This section does not apply to an ADF in relation to an income year unless the whole of the benefit that would accrue to the ADF from the application of this section in relation to the income year has been, or can reasonably expected to be, passed on to eligible depositors. An election made by the trustee of a complying superannuation fund under subsection 279(4) of the Income Tax Assessment Act 1936 that had effect for the income year of the fund in which 30 June 2007 occurs continues to have effect as if it had been made under section 295‑465 of the Income Tax Assessment Act 1997. Subdivisions 295‑I (no‑TFN contributions) and 295‑J (Tax offset for no‑TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006‑2007 income year ends on a day (the end day) after 1 July 2007 as if: (b) the entity’s no‑TFN contributions income for the entity’s 2007‑2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007‑2008 income year if the contributions concerned had been made in the entity’s 2007‑2008 income year. (2) Division 301 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section because you are a member of the fund in the same way as it would apply if the payments were superannuation member benefits paid to you from a complying superannuation fund. For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. Subdivision 301‑F of the Income Tax Assessment Act 1997 applies in relation to income years starting on or after 1 July 2007. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to the following in respect of an income year that starts on or before 1 July 2021: (b) the amendments of the Income Tax Assessment (1997 Act) Regulations 2021 made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023. (a) a superannuation benefit (the trigger benefit) was paid to a person in the 2020‑21 income year or an earlier income year; and (c) the trigger benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; and (2) The Commissioner cannot amend an assessment on the basis that a superannuation benefit paid to the person is a superannuation income stream benefit because of the amendments made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 if: (iii) the superannuation benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (a) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (b) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. (1) The Minister may, by legislative instrument, make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions) that: (a) relate to the amendments or repeals made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023; and (2) Without limiting subsection (1), rules made under this section before the end of the period of 12 months starting on the day that Schedule commences may provide that provisions of that Schedule, or any other Act or instrument, have effect with any modifications prescribed by the rules. Those provisions then have effect as if they were so modified. (2) Division 302 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section after another person’s death, because the other person was a member of that fund, in the same way as it would apply if the payments were superannuation death benefits paid to you from a complying superannuation fund. For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if: (b) just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. (2) For the purposes of Subdivision 82‑B of Division 82, Division 302 and section 303‑5 of the Income Tax Assessment Act 1997, the definition of death benefits dependant in section 302‑195 of that Act applies as if paragraphs (a) and (b) of the definition were replaced with the following paragraphs: (a) a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008 or a person who was formerly such a spouse; or (b) a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008, who is aged less than 18. (ii) a superannuation guarantee payment, a small superannuation account payment, an unclaimed money payment, a superannuation co‑contribution benefit payment or a superannuation annuity payment. (2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you at a time in the period: (i) a condition of release specified in item 107A or 207AA of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; or (ii) a condition of release specified in item 109AA of the table in Schedule 2 to the Retirement Savings Accounts Regulations 1997. (1) This section applies to a superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with section 292‑80B. (2) The superannuation benefit is not assessable income and is not exempt income to the extent that it does not exceed the amount mentioned in subsection (3). (3) The amount is the amount of excess non‑concessional contributions stated in the release authority in accordance with paragraph 292‑80A(3)(a), reduced (but not below zero) by the amount of any superannuation benefit that was not assessable income and not exempt income under a previous operation of subsection (2) in relation to the release authority. (4) The superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3). (a) you have an interest in a FIF (within the meaning of Part XI of the Income Tax Assessment Act 1936, as in force just before the commencement of item 37 of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010) (the paying fund); and (b) Subdivision 305‑B of the Income Tax Assessment Act 1997 applies in relation to the paying fund (see section 305‑55 of that Act); and (c) the paying fund transfers an amount to a complying superannuation fund in respect of you during the deduction year; and (d) you choose under section 305‑80 of the Income Tax Assessment Act 1997 that the amount, or part of the amount, is to be treated as assessable income of the complying superannuation fund; and (e) immediately before the transfer happens, there is a post‑FIF abolition surplus (within the meaning of the Income Tax Assessment Act 1936) for the paying fund in relation to you; and For the purposes of the definition of specified roll‑over amount in the Income Tax Assessment Act 1997, treat the taxable component of a directed termination payment (within the meaning of section 82‑10F) as the element untaxed in the fund of a superannuation benefit that is a roll‑over superannuation benefit. (1) This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007. > Note: This section also applies to an income stream replacing an earlier one because of an involuntary roll‑over (see section 307‑127). (2) Despite subsection 307‑125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows: (a) first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007); (b) next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits. The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit. (3) Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened: (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day; (ba) the holder of the superannuation interest is aged 60 or above on 1 July 2007, if none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day. (a) treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and (b) work out the tax free component of the superannuation interest for the purposes of section 307‑125 of the Income Tax Assessment Act 1997 under subsections (6) and (6A). (i) an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and (ii) the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time; (b) next, work out the unused undeducted purchase price (within the meaning of paragraph (a) of the definition of that term in subsection 27A(1) of the Income Tax Assessment Act 1936 just before the commencement of this section, and disregarding paragraphs (b) and (c) of that definition) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007; (c) next, work out the pre‑July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this section) of the eligible termination payment. (a) at least one superannuation income stream benefit was paid from the superannuation income stream before 1 July 1994; or (b) section 27AAAA of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007) applied to the superannuation income stream just before 1 July 2007; (7) For the purposes of paragraph (6)(c), disregard the value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment. (8) If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as: (b) if 1 or more other events mentioned in subsection (3) happened before the commutation—the time just before the earliest of those events happens. (a) references in that section to the later income stream (in relation to a time, or event happening, before the payment of that involuntary roll‑over superannuation benefit) include references to the earlier income stream; and (b) references in that section to the superannuation interest supporting the later income stream (in relation to a time, or event happening, before the payment of that benefit) include references to the earlier interest. (1) This section applies for the purposes of working out the amount of your total superannuation balance just before 1 July 2017. (2) The transfer balance mentioned in paragraph 307‑230(1)(b) of the Income Tax Assessment Act 1997 just before 1 July 2017 is taken to be equal to: (a) the sum of the transfer balance credits (if any) in your transfer balance account just after the start of 1 July 2017; less (b) the sum of the transfer balance debits (if any) arising in your transfer balance account on 1 July 2017 under item 4 of the table in subsection 294‑80(1) of that Act (about payment splits). (1) Section 307‑231 of the Income Tax Assessment Act 1997 applies in relation to borrowings that arise under contracts entered into on or after 1 July 2018. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2018 is treated as if it arose under a contract entered into before 1 July 2018 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) treat a deduction made under former section 279 of the Income Tax Assessment Act 1936 as having been made under section 295‑465 of the Income Tax Assessment Act 1997 instead; and (b) treat a deduction made under former section 279B of the Income Tax Assessment Act 1936 as having been made under section 295‑470 of the Income Tax Assessment Act 1997 instead. If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007‑2008 income year is, despite subsection 307‑345(1), the total of: (b) the amount by which $140,000 exceeds the upper limit for the 2006‑2007 income year (worked out under section 159SG of that Act). Division 316 of the Income Tax Assessment Act 1997 applies in relation to demutualisations occurring on or after 1 July 2008. If: (a) any assets held by the benefit funds of a life insurance company that is a friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a complying superannuation fund; and (b) the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer; the transfer is disregarded for any purposes of the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936. (1) In working out the amount that a life insurance company can deduct, in respect of life insurance policies that are disability policies (other than continuous disability policies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income. (2) In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection (1) applies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company’s liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320‑85(4) of that Act. If: (2) If the life insurance company wishes to include a part of an approved asset in its virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑87(2) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society establishes a virtual PST in the 2000‑01 income year, the calculation of the transfer values of the company’s virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year. (1) Subsection (3) applies for the purposes of subparagraph (b)(i) of the definition of virtual PST life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 259 of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007. (2) Subsection (3) also applies for the purposes of subparagraph (b)(i) of the definition of complying superannuation/FHSA life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 47 of Schedule 7 to the First Home Saver Accounts (Consequential Amendments) Act 2008. (3) Treat an annuity as having been purchased out of a superannuation lump sum or an employment termination payment, if the annuity was purchased: (b) out of an eligible termination payment (within the meaning of the Income Tax Assessment Act 1997, as in force just before the commencement mentioned in subsection (1) of this section). (2) If the life insurance company wishes to include a part of an approved asset in its segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (a) a life insurance company had a liability before 1 July 2000 under a life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and (c) there is a transfer of the company’s assets to the segregated exempt assets to meet that liability or that part of the liability; (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑105(1) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320‑225 of the Income Tax Assessment Act 1997 in the 2000‑01 income year, the calculation of the transfer values of the company’s segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year. Section 322‑25 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Part VC of the Insurance Act 1973 after 17 October 2008. 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you > new Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force after the commencement of this section. > old Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. > STS taxpayer means an STS taxpayer within the meaning of Division 328 of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. #### 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years (1) This section applies for the purpose of working out whether you are a small business entity (other than because of subsection 328‑110(4) of the Income Tax Assessment Act 1997) for the 2007‑08 or 2008‑09 income year. (2) You work out your aggregated turnover for the 2005‑06 or 2006‑07 income year as if the amendments made by Schedule 1 to the Tax Laws Amendment (Small Business) Act 2007 had been in force in relation to that year. (a) your aggregated turnover for the 2005‑06 income year (worked out in accordance with subsection (2)) is $2 million or more; but (b) your STS group turnover for that year (worked out under Subdivision 328‑F of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section) is less than $2 million. (2) The following provisions apply as if you are a small business entity for the income year in which you are winding up the business: #### 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you (1) For the purpose of working out whether you are a small business entity for the 2007‑08, 2008‑09, 2009‑10 or 2010‑11 income year (each a relevant income year) for the purposes of a provision to which subsection (3) applies: (2) An entity (the first entity) controls a discretionary trust for a relevant income year if, for any of the 4 income years (a previous income year) before that year: (a) if the previous income year is before the 2007‑08 income year—the trustee of the trust made a distribution of $100,000 or more to the first entity, any of its affiliates, or the first entity and any of its affiliates; or (i) the trustee of the trust paid to, or applied for the benefit of, the first entity, any of the first entity’s affiliates, or the first entity and any of its affiliates, any of the income or capital of the trust; and (ii) the percentage (the control percentage) of the income or capital paid or applied is at least 40% of the total amount of income or capital paid or applied by the trustee for that year. (1) This section sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (2) This section also sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (3) Any ordinary income that, apart from paragraph 328‑105(1)(a) of the Income Tax Assessment Act 1997 (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have derived before the changeover year (while you were using the STS accounting method) and you have not included in your assessable income because you have not received it is included in your assessable income for the changeover year. (4) Any general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, that, apart from paragraph 328‑105(1)(b) of that Act (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have incurred before the changeover year (while you were using the STS accounting method) and that you have not deducted because you have not paid them can be deducted for the changeover year. (b) for any later income year for which you are a small business entity but only if you used the STS accounting method for the income year before that later year. > Note: Example: You are a small business entity for the 2007‑08 and 2008‑09 income years and you continue to use the STS accounting method for those years. You are not a small business entity for the 2009‑10 income year so you cannot continue to use the STS accounting method for that year. Because you cannot use the STS accounting method for the 2009‑10 income year, you will not be able to use it again for a later income year even if you are a small business entity for that later year. In sections 328‑115 and 328‑120, STS accounting method means the accounting method that was required by the Income Tax Assessment Act 1997 to be used by STS taxpayers for the 2004‑05 income year. (b) you made a choice under subsection 328‑175(3) of old Subdivision 328‑D in relation to a depreciating asset you use to carry on a primary production business and for which you could deduct amounts under Subdivision 40‑F or 40‑G of the Income Tax Assessment Act 1997. (2) In determining whether you can choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997 in an increased access year, disregard subsection 328‑175(10) of that Act. (3) In applying paragraph 328‑175(10)(b) of that Act for the purpose of determining whether you can choose to use that Subdivision in any income year after the increased access years, disregard: (4) Paragraph 328‑180(1)(b) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that paragraph to $1,000: (i) first used the asset, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (i) first used the asset, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (i) first used the asset, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, on or after 1 July 2023 and on or before 30 June 2026. (a) a reference in that paragraph to the end of the income year in which you start to use the asset, or have it installed ready for use, for a taxable purpose were a reference to the earlier of: if: (i) first used the asset, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021. (5) Paragraph 328‑180(2)(a) or (3)(a) of the Income Tax Assessment Act 1997 applies to an amount included in the second element of the cost of an asset as if a reference in that paragraph to $1,000: (5A) For the purposes of determining whether, under subsection 328‑180(2) of the Income Tax Assessment Act 1997, you can deduct, for an income year (the current year), the taxable purpose proportion of an amount included in the second element of the cost of an asset, disregard paragraph (b) of that subsection if: (2) For the purposes of determining whether subsection 328‑180(1) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (b) of that subsection (which sets a limit of $1,000 on the cost of the asset) if, in the period beginning at the 2020 budget time and ending on 30 June 2023, you: (3) For the purposes of determining whether subsection 328‑180(2) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (a) of that subsection (which sets a limit of $1,000 on the amount) if the amount is included in the second element of the cost of the asset at any time in the period beginning at the 2020 budget time and ending on 30 June 2023. (4) In applying paragraph 328‑180(3)(a) of the Income Tax Assessment Act 1997 to an asset, disregard an amount included in the second element of the cost of the asset if the amount is deducted under subsection 328‑180(2) of that Act, as modified by subsection (3) of this section. (5) Section 328‑210 of the Income Tax Assessment Act 1997 applies as if the words “less than $1,000 but” in subsection (1) were disregarded, in relation to a deduction for an income year that ends: Subsection 328‑190(2) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that subsection to 15% were a reference to 57.5% if you are covered by section 40‑125 for the asset (which is about backing business investment). (1) A depreciating asset of yours that had been allocated to your general STS pool is treated as being allocated to your general small business pool. (2) A depreciating asset of yours that had been allocated to your long life STS pool is treated as being allocated to your long life small business pool. (3) If you made a choice, under subsection 328‑185(5) of old Subdivision 328‑D, not to have a depreciating asset allocated to your long life STS pool, the choice has effect for the purposes of subsection 328‑185(5) of new Subdivision 328‑D. (1) This section applies if a depreciating asset of yours is treated as being allocated to your general small business pool or long life small business pool under section 328‑185. (2) The opening pool balance of your general small business pool or long life small business pool for the 2007‑08 income year is taken to be the closing pool balance of your general STS pool or long life STS pool, as the case requires, for the 2006‑07 income year, reduced or increased by any adjustment required under section 328‑225 of new Subdivision 328‑D (about change in the business use of an asset). (a) you were not an STS taxpayer for the 2006‑07 income year (because you stopped being an STS taxpayer before that time); but (b) you are a small business entity for the 2007‑08 income year or a later income year and you choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets for that income year; the opening pool balance of your general small business pool or long life small business pool includes the sum of the taxable purpose proportions of the adjustable values of depreciating assets allocated to the pool under subsection 328‑185(3) of new Subdivision 328‑D for that year. (1) This section applies for the purposes of applying Subdivision 328‑D of the Income Tax Assessment Act 1997 for the 2012‑13 income year and later income years. (2) A depreciating asset that had been allocated to your long life small business pool is treated as being allocated to your general small business pool. (a) the closing pool balance of your general small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under section 328‑225 of that Act; and (b) the closing pool balance of your long life small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under that section. (1) This section applies if you chose to stop being an STS taxpayer for the 2005‑06 income year or the 2006‑07 income year. (2) You cannot choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets until at least 5 years after the income year for which you chose to stop being an STS taxpayer. > Note: Subdivision 328‑D of the Income Tax Assessment Act 1997 continues to apply to depreciating assets that have been allocated to your small business pools even if you are not a small business entity, or do not choose to use that Subdivision, for an income year: see section 328‑220 of that Subdivision. (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct 20% of particular expenditure for your 2023‑24 income year if: (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (d) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑450 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (6) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (ii) if the provider is a registered body of a kind listed in paragraph (2)(b), (c) or (d)—the training is within the provider’s scope of registration for that kind of registered body; and (d) each enrolment, or arrangement, for the provision of the training is made or entered into at or after 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022; and > Note: Paragraphs (b) and (c) mean this section will not apply to expenditure for on‑the‑job training or training provided by you in house. (a) a registered higher education provider (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); (b) a NVR registered training organisation (within the meaning of the National Vocational Education and Training Regulator Act 2011); (c) a registered education and training organisation (within the meaning of the Education and Training Reform Act 2006 (Vic.)); (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct for your 2023‑24 income year an amount that is equal to the sum of: (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (3) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑460 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (4) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (b) you incur the expenditure in the period starting at 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022 and ending at the end of: (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (4) For the purposes of paragraphs (1)(c) and (2)(c), in working out whether you can deduct an amount of expenditure on a depreciating asset, assume that: (b) throughout that effective life, you will use the asset for a taxable purpose to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose. (a) 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑470(1) or (3) applies in relation to the income year; and > Note: The deduction relates to the period of 1 July 2023 to 30 June 2024. An entity may have deducted an amount under paragraph (a) for a previous income year if the entity has a substituted accounting period. (2) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑470 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (3) Sections 8‑10, 40‑215 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (c) you start to use the asset, or have it installed ready for use, for any purpose after 30 June 2023 but before 1 July 2024; and (d) you start to use the asset, or have it installed ready for use, for a taxable purpose at a time (the start time) that is: (e) you are a small business entity, or an entity covered by subsection (4), for the income year that includes the start time; and (h) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) a new reasonably comparable depreciating asset that uses a fossil fuel (other than a use of which that is merely incidental) is available in the market at the start time; (ii) if the asset is being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than the other asset; (iii) if the asset is not being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than a new reasonably comparable depreciating asset that is available in the market at the start time; or (i) a depreciating asset (other than an asset excluded under subsection (6)) that uses electricity, or energy that is generated from a renewable source, to be more energy efficient; (iv) the use of electricity, or energy that is generated from a renewable source, by another depreciating asset to be monitored. (a) the amount is included in the second element of a depreciating asset’s cost under paragraph 40‑190(2)(a) of the Income Tax Assessment Act 1997; and (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (d) you are a small business entity, or an entity covered by subsection (4), for the income year in which the expenditure is incurred; and (i) if the asset could use a fossil fuel (other than a use of which that is merely incidental)—the asset to only use electricity, or energy that is generated from a renewable source; (ii) if the asset uses electricity, or energy that is generated from a renewable source—the asset to be more energy efficient; (g) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) For the purposes of paragraph (1)(b) or (3)(b), in working out whether you can deduct an amount of expenditure assume that: (i) for the purposes of paragraph (1)(b)—to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose; or (ii) for the purposes of paragraph (3)(b)—to the same extent as you use it for a taxable purpose in the income year in which the expenditure is incurred. (b) expenditure (other than expenditure referred to in subparagraph (3)(e)(i)) on an asset that can use a fossil fuel (other than a use of which that is merely incidental); (c) an asset that solely or predominantly generates electricity from a renewable source (for example, photovoltaic cells) or expenditure on such an asset; (d) an asset, or expenditure, being capital works for which you can deduct an amount under Division 43 of the Income Tax Assessment Act 1997; > Note: Subsections (1) and (3) also do not apply to an item of trading stock because such an asset is not a depreciating asset: see section 40‑30 of the Income Tax Assessment Act 1997. A reference in each of the following provisions of the Income Tax Assessment Act 1997 to a registration under section 27A of the Industry Research and Development Act 1986 includes a reference to a registration under former section 39J of that Act: (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) the R&D entity cannot deduct an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from: (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D entity could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:22pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the R&D entity is taken to be able to deduct under subsection 355‑315(2) of the new Act that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the R&D entity’s assessable income for the event year under subsection 355‑315(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 for the asset, the R&D entity is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑446 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the R&D entity is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑465 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: Section 355‑315 of the new Act would otherwise apply for the event in a case where the R&D entity had new law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by an R&D partnership; and (i) the partner can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the partner chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D partnership could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the partner is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:21.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D entity</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D partnership</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the partner is taken to be able to deduct under subsection 355‑525(2) of the new Act the partner’s proportion of that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the partner’s assessable income for the event year under subsection 355‑525(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partner’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if one or more partners (including the partner) in the R&D partnership is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset, the partner is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑448 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the partner is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑467 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s deductions under section 355‑520 of the new Act mentioned in subsection (4A) of this section. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the partner for the event, do so apply to the partner for the event. > Note 1: Section 355‑525 of the new Act would otherwise apply for the event in a case where the partner had new law deductions. Item 7 of the table in subsection 57‑110(2) in Schedule 2D to the Income Tax Assessment Act 1936 applies as if the deduction rules set out in the final column of that item also included former sections 73BA and 73BH of the Income Tax Assessment Act 1936. For the purposes of step 1 of the method statement in subsection 355‑415(2) of the Income Tax Assessment Act 1997, also disregard amounts that have already been taken into account under former subsection 73B(14AA) of the Income Tax Assessment Act 1936 for the R&D entity, the grouped entity and the R&D activities for an earlier income year. (1) This section applies if, apart from former paragraph 73B(10)(a) of the Income Tax Assessment Act 1936, an eligible company could deduct advance R and D expenditure in one or more income years commencing on or after 1 July 2011. > Note: That deduction would be under former section 73B of that Act as that former section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (a) apart from Subdivision H (prepaid expenditure) of Division 3 of Part III of the Income Tax Assessment Act 1936, an eligible company can deduct an amount under former section 73B, 73BA, 73BH, 73QA, 73QB or 73Y of that Act for an income year commencing before 1 July 2011; and (c) apart from former paragraph 73B(10)(a) of that Act, the eligible company could deduct an amount, as a result of that application of that Subdivision, for an income year commencing on or after 1 July 2011. > Note: That deduction would be under that Act as it applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (3) Former paragraph 73B(10)(a) of that Act is taken to apply to those income years commencing on or after 1 July 2011 as if the reference in that former paragraph to section 39J of the Industry Research and Development Act 1986 were a reference to section 27A of that Act. (4) An expression used in this section that is also used in former section 73B of the Income Tax Assessment Act 1936 has the same meaning in this section as it has in that former section. This Subdivision applies to core technology (within the meaning of former section 73B of the Income Tax Assessment Act 1936) if: (a) you incurred core technology expenditure (within the meaning of that former section) in an income year commencing before 1 July 2011 in relation to the core technology under one or more contracts entered into at or after the time referred to in former subsection 73B(12) of that Act; and (b) that expenditure (the undeducted expenditure) cannot be deducted for the last income year commencing before 1 July 2011. (1) This section applies for the purposes of Division 40 of the Income Tax Assessment Act 1997, other than sections 40‑292 and 40‑293 of that Act, if the core technology (the asset) is a depreciating asset. (2) Disregard this section, including its effect on the amount you can deduct under section 40‑25 of that Act for the asset, for the purposes of working out: (3) The asset’s opening adjustable value for the first income year that commences on or after 1 July 2011 (the first new income year) is equal to the amount of the undeducted expenditure. (4) Subsection 40‑75(2) of the Income Tax Assessment Act 1997 applies to the asset as if the first new income year were a change year (within the meaning of that subsection). If the core technology is not a depreciating asset, you can deduct the undeducted expenditure in equal proportions over a period of 5 income years starting in the first income year commencing on or after 1 July 2011. To work out the film component (if any) of your tax loss for the 1997‑98 income year or a later income year, apply former section 375‑805 of the Income Tax Assessment Act 1997. If you incurred a film loss for the purposes of former section 79F (Film losses of 1989‑90 to 1996‑97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989‑90 to 1996‑97 income years, that film loss is the film component of your tax loss for that income year. (1) To work out your film loss (if any) for the purposes of the Income Tax Assessment Act 1997 for the 1989‑90 or a later income year, apply former section 375‑810 of that Act. (2) You can deduct in the 1997‑98 or a later income year your film loss for any of the 1989‑90 to 1996‑97 income years only to the extent that it has not already been deducted. (1) Division 392 of the Income Tax Assessment Act 1997 applies to assessments for the 1998‑99 income year and later income years. (a) it had applied to your assessment for each income year before the 1998‑99 income year for which Division 16 of Part III of the Income Tax Assessment Act 1936 applied in relation to your income; and (b) you had carried on a primary production business during each income year before the 1998‑99 income year when you carried on a business of primary production; and (c) for each income year before the 1998‑99 income year you had a basic taxable income equal to your taxable income for the income year for the purposes of Division 16 of Part III of the Income Tax Assessment Act 1936. > Note: Section 149A of the Income Tax Assessment Act 1936 identifies what your taxable income for an income year is for the purposes of Division 16 of Part III of that Act. Division 392 of the Income Tax Assessment Act 1997 does not apply to your assessment for the 1998‑99 income year or a later income year if you made an election under section 158A (Election that Division not apply) of the Income Tax Assessment Act 1936 relating to an income year before the 1998‑99 income year. 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 A reference in Division 393 of the Income Tax Assessment Act 1997 to a deduction under section 393‑5 of that Act for making a farm management deposit is taken to include a reference to a deduction under section 393‑10 in Schedule 2G to the Income Tax Assessment Act 1936, as in force just before the commencement of this section, if the deposit was made before the 2010‑11 income year. #### 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 (b) the deposit was made with an FMD provider as a result of a request to which section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, applied; the unrecouped FMD deduction in respect of the deposit at that time is equal to the amount of the unrecouped deduction (within the meaning of the former subsection 159GA(3) of the Income Tax Assessment Act 1936) in respect of the deposit immediately before it ceased to be a deposit under the Loan (Income Equalization Deposits) Act 1976. > Note: This means that the unrecouped deduction relating to the deposit under the Loan (Income Equalization Deposits) Act 1976 continues to apply (by becoming an unrecouped FMD deduction) when the deposit is transferred to an FMD provider as a farm management deposit. The Loan (Income Equalization Deposits) Act 1976 was repealed on 22 February 2005. If a beneficiary of a trust was covered by paragraph (c) of the definition of primary producer in section 393‑25 in Schedule 2G to the Income Tax Assessment Act 1936 in the 2009‑10 income year, treat subsection 393‑25(3) of the Income Tax Assessment Act 1997 as having applied to the beneficiary for the purpose of determining the maximum number of choices that the trustee may make under subsection 393‑27(2) of that Act for the 2010‑11 income year. (a) a farm management deposit of an owner was unclaimed moneys for the purposes of section 69 of the Banking Act 1959; and (2) For the purpose of subsection 393‑10(1) of the Income Tax Assessment Act, treat the repaid unclaimed moneys as a repayment of the deposit of the owner. (3) To avoid doubt, the payment of unclaimed moneys to the Commonwealth under section 69 of the Banking Act 1959 is not a repayment of the deposit of the owner for the purposes of Division 393 of the Income Tax Assessment Act 1997. 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 #### 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 If a farm management deposit was made with an FMD provider as a result of a request under section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, then: (a) subsections 393‑40(1) to (4) of the Income Tax Assessment Act 1997 apply as if the day the deposit was made was the day on which the deposit was originally made under the Loan (Income Equalization Deposits) Act 1976; and (1) A copyright collecting society to which section 51‑43 of the Income Tax Assessment Act 1997 applies, may elect that, from 1 July 2004, the section apply to all ordinary income, and statutory income, collected or derived by the society on or after 1 July 2004. Division 420 of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division. Subdivision 615‑C of the Income Tax Assessment Act 1997 applies to you with the modifications set out in this Subdivision if you chose to obtain a roll‑over involving \*shares or units that: (b) were your trading stock, or revenue assets, at the time immediately before that disposal, redemption or cancellation. (1) Disregard subparagraph 615‑45(a)(ii), and paragraph 615‑45(b), of the Income Tax Assessment Act 1997 if the roll‑over relates to \*shares that were disposed of, redeemed or cancelled. (2) For each of the \*shares in the interposed company that you acquired in return for those of your shares or units in the original entity that were your \*trading stock at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  (2) For the purpose of calculating any profit or loss on a future disposal, cessation of ownership, or other realisation of a \*share in the interposed company that you acquired in return for those of your shares or units in the original entity that were \*revenue assets at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  Subdivision 620‑A of the Income Tax Assessment Act 1997 applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. (1) Part 3‑90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Act (No. 1) 2002 and amended by: (2) Section 713‑50 of the Income Tax Assessment Act 1997 (about factors to consider in determining destination of distribution by non‑fixed trust) applies for the purposes of this Part in the same way as it applies for the purposes of Part 3‑90 of that Act. ### Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly‑owned subsidiary of the entity (the future head company) that became the head company of the group; or (ii) at some time during that period, the entity was a wholly‑owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (ii) it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (1) If a group is a transitional group, its head company may, subject to subsection (3), choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (3) If the choice is to be made after the end of the period mentioned in paragraph (2)(a) and before the end of the day mentioned in paragraph (2)(b), it cannot be made unless each entity in relation to which the conditions in subsection (5) are satisfied has agreed to it being made. (a) the entity (the leaving entity) ceased to be a subsidiary member of the group before the choice was made (in a subsection (3) case) or before the revocation took place (in a subsection (4) case); and (b) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; and (c) the asset had become that of the head company because that section applied when a chosen transitional entity (whether or not the same entity as the leaving entity) became a subsidiary member. Section 716‑855 applies for the purposes of this Division in the same way as that section applies for the purposes of Part 3‑90 of the Income Tax Assessment Act 1997. is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705‑B of that Act and with this Division. 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity Section 701‑10 (cost to head company of assets of joining entity) and subsection 701‑35(4) (setting value of trading stock at tax‑neutral amount) of the Income Tax Assessment Act 1997 do not apply to the assets of a chosen transitional entity. > Note: The fact that the head company inherits the entity’s history under section 701‑5 of that Act when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time. #### 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities (2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non‑chosen subsidiary) is worked out in a special way. (b) for each sub‑group (see subsection (6)) that exists in relation to the non‑chosen subsidiary—the sub‑group’s notional allocable cost amount (see subsection(5)) for the non‑chosen subsidiary. (4) The head company adjusted allocable amount for the non‑chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if; (b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of head company’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub‑group in relation to the non‑chosen subsidiary. (5) For each sub‑group that exists in relation to the non‑chosen subsidiary, there is a sub‑group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non‑chosen subsidiary if: (a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non‑chosen subsidiary and the entities comprising the sub‑group; and (c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub‑group membership interests (see subsection (6)) in relation to the sub‑group, and any such entity held those membership interests during the period when it actually held them; and (d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of chosen transitional entity’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub‑group. (6) If a chosen transitional entity holds membership interests in a non‑chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non‑chosen subsidiary: (a) the chosen transitional entity and each interposed non‑chosen subsidiary comprise a sub‑group in relation to the non‑chosen subsidiary (unless the non‑chosen subsidiary is included in a sub‑group in relation to another non‑chosen subsidiary); and (i) the membership interests that the chosen transitional entity holds directly in the non‑chosen subsidiary or in any of the interposed non‑chosen subsidiaries; (ii) the membership interests that each interposed non‑chosen subsidiary holds directly in the non‑chosen subsidiary or in any of the other interposed non‑chosen subsidiaries. #### 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities If any provision of the Income Tax Assessment Act 1997 would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply. > Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred. (1) This section has effect for the purposes of applying section 705‑70 (step 2 of allocable cost amount) of the Income Tax Assessment Act 1997 in relation to a transitional entity. (2) In spite of subsection 705‑70(1A) of that Act, if the amount of an accounting liability of the transitional entity would be different when it becomes an accounting liability of the transitional group, that difference is not taken into account in working out the amount of the liability. #### 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different (a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset (the roll‑over asset) for which there was: (ii) roll‑over relief under section 40‑340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and (i) became an asset of the head company when the transitional group came into existence because subsection 701‑1(1) (the single entity rule) of that Act applies; or differs at that time from what it would have been if the act, transaction or event that gave rise to the CGT event had not occurred in relation to the roll‑over asset; then the provisions mentioned in subsection (2) apply as if the act, transaction or event had not occurred in relation to the roll‑over asset. (a) the act, transaction or event mentioned in subsection (1) happened before a demerger and in connection with the demerger; and (b) before the transitional group came into existence, at least one of the following entities ceased to be a member of the demerger group because of the demerger: (i) the originating company in relation to the roll‑over, or the transferor in relation to the roll‑over relief, was a foreign resident; and (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as a transitional foreign‑held subsidiary of the group. #### 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets (1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied. (2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset. (a) the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and (b) former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset. (4) The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group. (6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses. #### 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets (b) just before the transitional group came into existence, the entity that became the head company held a pre‑CGT asset; and (d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre‑CGT asset and is held by the head company only because the entity is taken by subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company. (2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence. #### 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity (1) This section provides for an addition to the step 1 amount for working out under section 711‑20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity) that ceases to be a subsidiary member of the transitional group at a time (the leaving time), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701‑1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount for paragraph</span><span> </span><span>(2)(c)</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">If, because of the circumstances described in paragraphs</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(a) and (b):</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">The amount is:</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:180.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following provisions applied to the entity:</span></p><p class="Tablea"><span>(a) former section</span><span> </span><span>61A of the </span><span style="font-style:italic">Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(b) former Subdivision</span><span> </span><span>57</span><span>‑</span><span>I in Schedule</span><span> </span><span>2D to the</span><span style="font-style:italic"> Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(c) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(4) of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td><td style="width:148.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the amount treated as being the cost of the asset under that provision; and</span></p><p class="Tablea"><span>(b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>2</span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following subsections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span><span> applied to the entity:</span></p><p class="Tablea"><span>(a) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(5);</span></p><p class="Tablea"><span>(b) 58</span><span>‑</span><span>70(3)</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The amount treated as being the cost, or the first element of the cost, of the asset under that subsection</span></p></td></tr></tbody></table> ``` (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997, as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="4" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amounts and provisions for different dates of acquisition</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Date of the acquisition</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Amount</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Provision of Division</span><span style="font-weight:bold"> </span><span style="font-weight:bold">58 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> applying to the acquisition and the working out of the amount</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:76.7pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>160</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>220</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>After 30</span><span> </span><span>June 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>First element of the cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subsection</span><span> </span><span>58</span><span>‑</span><span>70(5)</span></p></td></tr></tbody></table> ``` > Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. > Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and ### Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: #### 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70‑45 to 70‑70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420‑51 to 420‑58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (a) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority‑owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority‑owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority‑owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority‑owned entity became a subsidiary member of the group, there was roll‑over relief under section 40‑340 of the Income Tax Assessment Act 1997. (a) while the asset is, because subsection 701‑1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, its tax cost setting amount is taken to be equal to the continuing majority‑owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711‑30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997. (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset becomes that of an entity (a new asset holder) other than the head company because subsection 701‑1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder) acquiring some or all of the membership interests in the new asset holder; and (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset is acquired by another entity (a new asset holder) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll‑over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value asset just before the acquisition; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 #### 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 (b) members of the consolidated group or the MEC group mentioned in subsection 104‑500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701‑1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701‑1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (3) If this section applies, neither subsection 104‑500(4) nor subsection 104‑500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year. ### Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C‑B); and (b) modifies certain rules in Part 3‑90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C‑C). > Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719‑2 and 719‑10 of this Act). 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership #### 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(ii) of that Act (see subsection 719‑2(3) of this Act). (b) a trust (a non‑resident trust) that does not meet the requirements in any item of the table in section 703‑25 of the Income Tax Assessment Act 1997. (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non‑resident company or a non‑resident trust; or Test entity must be a subsidiary member on assumption that non‑resident companies and non‑resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non‑resident company or non‑resident trust were a subsidiary member of the group. (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv). #### 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(iii) of that Act (see subsection 719‑2(3) of this Act). (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C‑10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3). If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C‑10 are met; and (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (ii) an entity that is a transitional foreign‑held indirect subsidiary of the group because of another application of this paragraph; Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign‑held indirect subsidiary would need to have satisfied the set of requirements in either section 701C‑10 or 701C‑15 (1) This Subdivision applies if an entity (the transitional foreign‑held joining entity) that is a transitional foreign‑held subsidiary or a transitional foreign‑held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time) the group comes into existence. (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign‑held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign‑held indirect subsidiary that becomes a subsidiary member at that time takes account of this. (a) section 701‑10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); apply, for the purposes of setting the tax cost of an asset of the transitional foreign‑held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign‑held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. > Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign‑held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign‑held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign‑held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign‑held subsidiary and the other entity. > Note 2: If the transitional foreign‑held joining entity is a transitional foreign‑held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705‑A of the Income Tax Assessment Act 1997, in its application in accordance with Subdivision 705‑B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company. Subsection 701‑35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax‑neutral amount) does not apply to the assets of the transitional foreign‑held joining entity if it is a transitional foreign‑held subsidiary. Section 701‑15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: (a) this section applies to each membership interest in the transitional foreign‑held subsidiary that is held by an entity (an eligible non‑resident) of a kind mentioned in subparagraph 701C‑20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign‑held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701‑1(2) of the Income Tax Assessment Act 1997 applies to the eligible non‑resident in the same way as it applies to the head company. Section 711‑5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: > Note: If the leaving entity is a transitional foreign‑held subsidiary (within the meaning of section 701C‑20 of the Income Tax (Transitional Provisions) Act 1997), this Division will, in accordance with subsection 701‑15(4) of this Act (see section 701C‑40 of the first‑mentioned Act), apply to membership interests that an eligible non‑resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity. (1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707‑C of the Income Tax Assessment Act 1997. (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period. (1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if: (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (d) the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997. (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: (1) The head company of a consolidated group may make a choice in the approved form to apply section 701D‑10 to another entity. (2) However, the head company cannot make that choice if subsection 701D‑10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (a) an asset of the head company because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701‑55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40‑77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40‑77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40‑285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount. (b) after the asset became an asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). > Note: The final entity will be different from the head company if an entity (the leaving entity) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40‑285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. > Note: The final entity will be entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701‑5 (the entry history rule) of that Act and perhaps also section 701‑40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity) became a subsidiary member of the group; and It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). > Note: In some cases, section 705‑47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40‑285(3) of this Act. If: (b) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and subsection 40‑285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701‑10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997. > Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997. (1) For the purposes of Part 3‑90 of the Income Tax Assessment Act 1997, this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960‑G of that Act whether the interest or right is a membership interest of the entity in the other entity. > Note: Under Subdivision 960‑G of the Income Tax Assessment Act 1997, a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001) apply to transactions in relation to the interest or right at the relevant time. Despite the amendments of section 703‑35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) If an entity (the joining entity) to which section 40‑75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time), this Subdivision applies in relation to: (ii) became assets of the head company of the group at the joining time because of section 701‑1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure. (1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). (2) If the joining entity could not deduct an amount under Subdivision 40‑B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701‑55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40‑35, 40‑37, 40‑40 or 40‑43 treated the joining entity as holding a notional asset. > Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705‑30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. (a) deductions under former Subdivision 330‑A, 330‑C or 330‑H of the Income Tax Assessment Act 1997, or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated an entity as holding because of the expenditure. (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); > Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40‑75(4) of this Act, but may have been reset since under Subdivision 40‑B of the Income Tax Assessment Act 1997. > Note 2: The effective life of a notional asset is specified by whichever one of sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act is relevant to the notional asset. (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (9) Section 705‑55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705‑45 of that Act. > Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705‑40 of the Income Tax Assessment Act 1997. (a) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701‑5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. > Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705‑305(3). (ii) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707‑A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member. 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value #### 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707‑320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor) other than the real loss‑maker mentioned in subsection 707‑315(1) of that Act for the bundle; and (b) both the real loss‑maker and the value donor became members of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (ca) neither the real loss‑maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (ii) a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (ii) section 713‑540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (2) It must have been possible for the real loss‑maker to have transferred the loss to the value donor under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss‑maker at the initial transfer time the amount worked out using the formula:  > Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707‑327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss‑maker to the transferee. > total of real loss‑maker’s non‑foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss‑makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) included in a bundle of losses: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. #### 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value (1) This section affects the calculation of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707‑325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936, in the bundle). > Note: This section does not affect the calculation of the real loss‑maker’s modified market value for other purposes (such as the real loss‑maker being a value donor for the purposes of another application of section 707‑325 of this Act). (3) One condition is that the event was an injection of capital directly into the real loss‑maker by the value donor mentioned in section 707‑325 of this Act. (c) that would have caused subsection 707‑325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss‑maker’s modified market value (even if no other events described in subsection 707‑325(4) of that Act had occurred), apart from this section. (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss‑maker (whether or not the event also involved either the value donor or the real loss‑maker); or (1) This section has effect for the purposes of working out under Subdivision 707‑C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707‑325, as if there were added to the modified market value of the real loss‑maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (c) the loss is not a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707‑A of that Act at the initial transfer time had the company: > Note: This section has effect even if the amount added to the real loss‑maker’s modified market value under section 707‑325 is nil because the value donor’s modified market value is nil. (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707‑325, as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (4) If the transferee mentioned in subsection 707‑325(1) chooses, sections 707‑310, 707‑335 (except paragraph 707‑335(2)(a)) and 707‑340 of the Income Tax Assessment Act 1997 (and subsections 707‑315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: > Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707‑325(1)(d) and (e) and subsection 707‑325(2) in an application of section 707‑325 separate from the application of that section mentioned in paragraph (1)(a) of this section. > Note: This means that a loss that provided a basis for section 707‑325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. (b) in connection with the requirement that it must have been possible for a company (the notional transferor) to transfer to another company (the notional transferee) for an income year a loss under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997. (b) ends immediately after the initial transfer time mentioned in subsection 707‑320(1) of the Income Tax Assessment Act 1997. > Note: For the purposes of identifying the trial year using the definition in section 707‑120 of the Income Tax Assessment Act 1997, the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time. (1) Subsection (3) of this section affects the calculation, under section 707‑325 of the Income Tax Assessment Act 1997 and section 707‑325 of this Act, of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (the formation time) the group became a consolidated group; and (b) the provisions described in subsection 707‑327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707‑327(1)(b) and (c) of this Act as if the bundle included the loss; and (d) subsection 707‑325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707‑325(1) of this Act chooses that this section apply in relation to the real loss‑maker. (2) Section 707‑325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. (3) Disregard for the purposes of subsection 707‑325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707‑325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or > Note: Disregarding such an event could have a direct or indirect effect on the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss‑maker’s modified market value calculated under section 707‑325 of the Income Tax Assessment Act 1997, if the real loss‑maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707‑325 of this Act to add an amount to the real loss‑maker’s modified market value for those purposes. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) that: (b) was transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from an entity other than the real loss‑maker. (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997. Disregard an event that is described in subsection 707‑325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707‑325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004. (1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss‑maker) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time) the transferee became the head company of a consolidated group; and (ii) the conditions in one or more of paragraphs 165‑15(1)(a), (b) and (c) did not exist in relation to the real loss‑maker; and (da) the real loss‑maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non‑transferred losses) of the same sort that the transferee made without a transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non‑transferred losses). (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. <table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Limit on utilising the losses</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For this income year:</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the losses that the transferee may utilise cannot exceed:</span></p></td></tr></thead><tbody><tr><td style="width:20.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:120.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The first income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span style="font-size:8pt; vertical-align:2pt">1</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The second income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) </span><span style="font-size:8pt; vertical-align:2pt">2</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the amount of the losses utilised for the income year mentioned in item</span><span> </span><span>1</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The third income year ending after the initial transfer time, or a later income year</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time</span></p></td></tr></tbody></table> ``` (4) Subdivision 707‑C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707‑A of that Act. > Note: This has 2 effects. First, Subdivision 707‑C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707‑A of that Act). (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). (7) This section does not limit the transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company. In working out when a choice may be made under subsection 707‑325(5), 707‑327(5), 707‑328A(4) or 707‑350(5), ignore losses to which section 713‑535 of the Income Tax Assessment Act 1997 applies. > Note: That section deals with losses transferred under Subdivision 707‑A of that Act from certain wholly‑owned subsidiaries of life insurance companies that are members of a consolidated group. Section 707‑405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act. (1) This section reduces the adjustable value of a notional asset that section 40‑35, 40‑37, 40‑38, 40‑40 or 40‑43 treats the head company of a consolidated group as holding, if: (b) that section treats the leaving entity as holding a notional asset because of section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997. > Note: Section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time. The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences. (1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event) happening involving an entity (the originating entity) and another entity (the recipient entity) if: (a) the event occurs in connection with a life insurance company (the member life insurance company) becoming a member of a consolidated group; and (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest) in a company or in another trust. (a) a life insurance company transfers an asset (also the original asset) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320‑200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset) to its segregated exempt assets where, apart from this Subdivision, section 320‑255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event) is made in connection with the life insurance company (also the member life insurance company) becoming a member of a consolidated group. (1) This Subdivision applies only if the originating entity (for a section 713‑505 case) or the life insurance company (for a section 713‑510 case) chooses that it apply. (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713‑510 of the Income Tax Assessment Act 1997; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713‑510 of the Income Tax Assessment Act 1997; and (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs. This Act, and the Income Tax Assessment Act 1997, apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group. (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain) that the originating entity would have made as a result of the deferral event is disregarded; and (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount) under paragraph 320‑15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (1) This section operates if, after the deferral event happens, another event (the new event) happens where the new event is: (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (i) the original asset being transferred to or from the company’s virtual PST under section 320‑180, 320‑185 or 320‑195 of the Income Tax Assessment Act 1997; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320‑235, 320‑240 or 320‑250 of that Act; or (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. > Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713‑505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (1) For a section 713‑505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713‑535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: (a) an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group at a time (the leaving time); and (b) but for the cessation of membership and section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision. Sections 716‑340 and 716‑345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. <table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:345.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Extended operation of sections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 1</span><br><span style="font-weight:bold">Sections</span><span style="font-weight:bold"> </span><span style="font-weight:bold">716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">340 and 716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">345 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> operate in relation to:</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 2</span><br><span style="font-weight:bold">In the same way as they operate in relation to:</span></p></td></tr></thead><tbody><tr><td style="width:5.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:161.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>46</span><span>‑</span><span>90 of that Act</span></p></td><td style="width:156.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>40</span><span>‑</span><span>455 of that Act</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software pool created under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure allocated to a software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Software, expenditure on which was in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>In</span><span>‑</span><span>house software, expenditure on the development of which is allocated to a software development pool</span></p></td></tr></tbody></table> ``` (1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: Section 703‑30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004. (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time) a wholly‑owned subsidiary of the entity that became the head company of the group (the head entity), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier‑1 company of the group at the formation time. Despite the amendment of section 719‑30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) Section 719‑160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719‑160(3) of the Income Tax Assessment Act 1997. (3) However, that effect of section 719‑160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division. (2) Paragraphs 701‑1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier‑1 company at the time the MEC group came into existence. (a) the entity and one or more other entities were members of a potential MEC group as eligible tier‑1 companies, throughout the period: (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier‑1 company, at the time the transitional group came into existence. To avoid doubt, sections 707‑325 and 707‑327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719‑305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707‑A of that Act. Subsection 719‑325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006. (1) A reference in an agreement to item 25 of the table in subsection 721‑10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: (1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: Division 725 applies to a scheme entered into on or after 1 July 2002. It also applies to a scheme entered into on or after 27 June 2002, but only if: ### Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (1) Division 727, as inserted by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 and amended by the New Business Tax System (Consolidation and Other Measures) Act 2003, applies to a scheme entered into on or after 1 July 2002. (b) a presumed indirect value shift that happens under the scheme and affects a realisation event that happens on or after 1 July 2002. (a) the economic benefits taken into account in determining that the scheme has resulted in that indirect value shift or presumed indirect value shift include economic benefits provided by: > Note: In that case, the consequences of the trigger event are worked out under Division 138 or 139 of the Income Tax Assessment Act 1997: see items 13 and 14 of Schedule 15 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002. (1) An indirect value shift does not have consequences under Division 727 of the Income Tax Assessment Act 1997 if, to the extent of at least 95% of their total market value, the greater benefits consist entirely of: (a) a right to have services that are covered by section 727‑240 of that Act provided directly by the losing entity to the gaining entity; or (d) if the losing entity’s 2002‑2003 income year ends before 30 June 2003—the start of the losing entity’s 2004‑2005 income year. (2) For the purposes of section 727‑850 (about a presumed indirect value shift affecting a realisation event) of the Income Tax Assessment Act 1997, subsection (1) of this section applies to the presumed indirect value shift: #### 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (2) Paragraph 727‑470(2)(a) of the Income Tax Assessment Act 1997 (as in force immediately before the commencement of this section) continues to have effect in relation to the indirect value shift as if the repeals and amendments made by Schedule 1, Parts 1 and 2 of Schedule 3 and Schedule 8 to the Tax Laws Amendment (Small Business) Act 2007 had not been made. ## Division 316 Demutualisation of friendly society health or life insurers ## Subdivision 316 ‑A—Application ## 316‑1 Application of Division 316 of the 316‑1 Application of Division 316 of the Income Tax Assessment Act 1997 Division 316 of the Income Tax Assessment Act 1997 applies in relation to demutualisations occurring on or after 1 July 2008. ## Part 3 ‑35—Insurance business (a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and (2) Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001 (the new Act) applies to the plant on this basis: (a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant’s opening adjustable value; and (b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and (c) if you excluded an amount from your assessable income under section 42‑290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999—the cost of the plant, and its opening adjustable value, are reduced by that amount; and (d) if subparagraph (1)(b)(ii) applies to you—you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi‑owner of the plant under the former Act continue. (3) If you were using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis: (a) for the diminishing value method—replace the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate you were using; and (i) replace the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate you were using; and (ii) increase the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note 1: Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced. > Note 2: Small business entities can choose to work out the decline in value of their depreciating assets under Division 328. (a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or (3) If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40‑70(1) or 40‑75(1) of the new Act that includes the plant’s effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and (2) For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets. (3) For a case where the plant is merged into another depreciating asset, section 40‑125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it. (b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and (a) you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and (b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU’s opening adjustable value. (1) Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001. (2) For a unit of software for which you were deducting amounts under Subdivision 46‑B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis: (d) you must use the same effective life you were using under Subdivision 46‑B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001. (1) This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day. (b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and (c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and (1) This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001. > Note: Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8). (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330‑80 of the former Act for your income year ending on 30 June 2001; and (c) in applying the formula in section 40‑75 of the new Act for the income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The remaining effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these: (i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and (ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (7) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and (b) the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of expenditure incurred in carrying on eligible quarrying operations—the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (i) you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day) after 30 June 2001; or (ii) the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day) after 30 June 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which the start day occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year. there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (1) This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330‑H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and (c) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (i) any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset); (i) any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (4) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (4) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (b) the expenditure would have been transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330‑H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for your income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (1) Despite subsections 40‑35(5), 40‑38(5) and 40‑40(4), there is no additional decline in the value of the notional asset referred to in those subsections if: (a) apart from this section, subsection 40‑35(5), 40‑38(5) or 40‑40(4) would apply because the real asset referred to in that subsection is disposed of; and (a) at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373‑35 of the former Act; and (b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day. (a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and (1) Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time). (2) Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time. (a) you have deducted or can deduct an amount under Subdivision 387‑G of the former Act for an amount (the qualifying amount) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and (b) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and (1) This section applies to you if you have deducted or can deduct an amount under Subdivision 400‑A of the former Act for an amount (the qualifying amount) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400‑A of the former Act. (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and (c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400‑15(3) of the former Act; and (1) Units of plant that you had allocated to a pool under Subdivision 42‑L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act. (a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and (c) in applying the formula in section 40‑70 of the new Act for your income year in which 1 July 2001 occurs—it has a base value equal to that opening adjustable value; and (d) you replace the component in the formula in subsection 40‑70(1) of the new Act that includes an asset’s effective life with the pool percentage you were using for the pool; and (e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40‑115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and (f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset. (3) An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item). > Note 1: You work out the decline in value of an item removed under this subsection under Subdivision 40‑B of the new Act, using the cost for it worked out under section 40‑205 of the new Act. (b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset. (2) The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year) in this way: (a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and (b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section. (a) for a unit of plant (including IRUs and expenditure on software that is not pooled)—its undeducted cost at the end of 30 June 2001; or (b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence—the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or (c) for transport capital expenditure—the entity’s amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or (d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (e) for expenditure on evaluating the impact on the environment of a project—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (f) for assets that were pooled under Subdivision 42‑M or 42‑L of the former Act—the closing balance of the pool at the end of 30 June 2001. (4) The asset’s base value for applying the formula in section 40‑70 of the new Act for the diminishing value method is that opening adjustable value. (5) The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an item of plant for which you were using the prime cost method—using the rules in section 40‑10 of this Act; and (c) for a unit of software for which the entity was deducting amounts under Subdivision 46‑B of the former Act—using the rules in subsection 40‑25(2) of this Act; and (f) for an amount of expenditure on evaluating the impact on the environment of a project—using the rules in section 40‑55 of this Act. (6) The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an amount of unrecouped expenditure under Division 330 of the former Act—using the rules in section 40‑35 of this Act; and (b) for an amount of transport capital expenditure under Division 330 of the former Act—using the rules in section 40‑40 of this Act; and (7) The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act. (a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑C of the former Act; or (b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑H of the former Act; or (c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387‑B of the former Act; or (d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; or (e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365. (9) The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001. (10) You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount). (11) You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount. (1) Subsections 40‑65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened: (b) you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act. (a) paragraph 40‑65(6)(a) of the Income Tax Assessment Act 1997 included both events set out in subsection (1) of this section; and (b) subsections 40‑65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events. (1) A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936. (2) An amount you have deducted or can deduct for a water facility under Subdivision 387‑B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40‑F of the new Act. (3) A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936. (a) you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40‑115 (about splitting a depreciating asset) or 40‑125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and (b) it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40‑72 of that Act; (2) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if: (c) it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40‑72 of that Act. (3) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset) before 10 May 2006 if: (b) the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and (d) it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40‑72 of that Act. (a) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you: (b) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001. (2) If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act. (3) Otherwise, Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section. (a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or (b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or (ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life. (1) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001. > Note: If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40\. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997. (1A) Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001. (1B) Subsection (1) applies to a mining, quarrying or prospecting right (the new right) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if: (i) the other company is a member of the same wholly‑owned group as the original holder and was a member of that group just before that day; and (ii) the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer. (1D) Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if: (b) the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001. (a) you acquired, under an interest realignment arrangement, an interest (a new interest) in a mining, quarrying or prospecting right; and (b) the interest was acquired in exchange for one or more other interests (old interests) in other mining, quarrying or prospecting rights; and Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001. (a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or (b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership; the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act. (3) An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that: (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act. (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act. (6) Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243. (7) An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if: (a) you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and (8) The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section. (c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act. (2) Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001. A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act. if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011. (2) The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011. (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset for an income year is the amount worked out under section 40‑130 if: (a) the income year is the year in which you start to use the asset, or have it installed ready for use, for a taxable purpose; and (b) subsection (2) (about businesses with turnover less than $500 million) applies to you for the year and for the income year in which you started to hold the asset (if that was an earlier year); and > Note 1: An effect of paragraph (1)(a) is that this Subdivision only applies to one income year per asset. See also subsection 40‑135(1). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $500 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. Exception—assets for which the decline in value is worked out under section 40‑82 or Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (3) However, this section does not apply to a depreciating asset for an income year if you work out the decline in value of the asset for the income year under any of the following: (1) For the purposes of paragraph 40‑120(1)(c) and section 328‑182, you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you: > Note: Section 328‑182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997. (i) entering into a contract under which you hold the post‑12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑12 March 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post‑12 March 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (8) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (9) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (10) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (1) For the purposes of section 40‑120, the decline in value for the income year in which paragraph 40‑120(1)(a) is satisfied (the current year) is: > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 12 March 2020 to 30 June 2020 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2020 to 30 June 2021. (a) 50% of the asset’s cost as at the end of the current year, disregarding any amount included in the second element of the asset’s cost after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997, assuming its cost were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (3) However, the amount worked out under subsection (2) for an income year cannot be more than the amount that is the asset’s cost for the year. (a) 50% of the sum of the asset’s opening adjustable value for the current year and any amount included in the second element of its cost for that year, disregarding any amount included in that second element after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997 assuming: (ii) for the prime cost method—the component “Asset’s \*cost” in the formula in subsection 40‑75(1) of that Act (as adjusted under that section) were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (b) for the prime cost method—the sum of its opening adjustable value for the income year and any amount included in the second element of its cost for that year. (1) The decline in value of a depreciating asset is not worked out under this Subdivision for an income year if this Subdivision already applied in working out the decline in value of the asset for an income year. (2) For an income year later than the year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (3) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (4) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) You may choose that the decline in value of a particular depreciating asset for an income year, and subsequent income years, is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the first income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. If this Subdivision applies to work out the decline in value of a depreciating asset you hold for an income year, no other provision of this Act or the Income Tax Assessment Act 1997 applies to work out that decline in value. (1) For the purposes of this Subdivision, you are covered by this section for a depreciating asset if, on or before 30 June 2023: (2) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (3) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or Exception—assets for which the decline in value is worked out under Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (a) the asset is allocated to a low‑value pool, or expenditure on the asset is allocated to a software development pool (see Subdivision 40‑E of the Income Tax Assessment Act 1997); or (b) you or another taxpayer has deducted or can deduct amounts for the asset under Subdivision 40‑F of the Income Tax Assessment Act 1997 (about primary production depreciating assets). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $5 billion; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this section. (ii) if the 2019‑20 income year ends on or before 6 October 2020—the sum of your ordinary income (if any) and statutory income (if any) for the 2019‑20 income year; and (c) the sum of the amounts worked out under subsection (3) for the 2016‑17, 2017‑18 and 2018‑19 income years exceeds $100 million. (b) next, work out the cost of each of those assets (including any amounts included in the second element of the asset’s cost at a time that is in the income year); (4) For the purposes of subsection (3), disregard an asset if, at the time you first used the asset, or had it installed ready for use, for a taxable purpose: (a) it was not reasonable to conclude that you would use the asset principally in Australia for the principal purpose of carrying on a business; or (5) For the purposes of paragraph (3)(b), to work out the cost of a depreciating asset that is capital works (see section 43‑20 of the Income Tax Assessment Act 1997): (a) disregard section 40‑45 of that Act and work out the cost of the capital works using Subdivision 40‑C of that Act; and (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under subsection (3) if: (a) where section 40‑155 covers you for the current year (regardless whether section 40‑157 also covers you for the current year)—an exclusion applies to you and the asset for the current year under section 40‑165 (about exclusions for businesses with turnover of $50 million or more); or (ii) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s start time occurs in the current year—the asset’s cost as at the end of the current year, disregarding any amount included in the asset’s cost after 30 June 2023; or (b) if the asset’s start time occurred in an earlier year—the sum of its opening adjustable value for the current year and any amount included in the second element of its cost for the current year, disregarding any amount included in the asset’s cost after 30 June 2023. > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 6 October 2020 to 30 June 2021 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2021 to 30 June 2022. (a) where paragraph 40‑160(2)(a) applies—section 40‑155 would not cover you for the income year if the reference in that section to $5 billion were instead a reference to $50 million; and (i) entering into a contract under which you hold the post‑6 October 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑6 October 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of satisfying paragraph 40‑160(1)(a) for the post‑6 October 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you already satisfied paragraph 40‑160(1)(a) of this Act for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (9) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (1) For the purposes of subsections 40‑160(2) and 40‑170(1A), an exclusion applies to you and an asset for an income year if any of the exclusions in this section applies in relation to the asset. (4) This exclusion applies in relation to the asset if the asset is available for use, at any time in the income year, by any of the following: (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under this section if: (ii) you started to use the asset, or have it installed ready for use, for a taxable purpose in an earlier income year; and (b) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under section 40‑82 of the Income Tax Assessment Act 1997—the amount worked out under subsection (3); or (b) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under Subdivision 40‑BA of this Act—the amount worked out under subsection (4); or Assets affected by section 40‑82 of the Income Tax Assessment Act 1997 (about assets costing less than $150,000, medium sized businesses) (a) the amount that would be the asset’s decline in value for the year under section 40‑82 of the Income Tax Assessment Act 1997, assuming the reference in subparagraph 40‑82(3A)(b)(ii) of that Act to 31 December 2020 were instead a reference to the 2020 budget time; and (a) the amount that would be worked out under paragraph 40‑130(2)(a) or (4)(a) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(a) and (4)(a) to 30 June 2021 were instead references to the 2020 budget time; and (c) the amount that would be worked out under paragraph 40‑130(2)(b) or (4)(b) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(b) and (4)(b) to “the amount worked out under paragraph (a)” were instead references to “the amounts worked out under paragraphs 40‑170(4)(a) and (b)”. (a) the amount that would be the asset’s decline in value for the year under Division 40 of the Income Tax Assessment Act 1997, disregarding any amounts included in the eligible second element worked out under section 40‑175 of this Act for the asset for the year; and The amount worked out under this section (the eligible second element) for a depreciating asset for an income year is the sum of any amounts included in the second element of the asset’s cost at a time that is in both of the following periods: (1) For an income year later than a year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (2) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (3) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) This section applies if the decline in value for a depreciating asset for an income year is worked out under this Subdivision, and at a time (the balancing adjustment time) in a later income year: (i) it becomes not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (b) none of the requirements in paragraphs 40‑295(1)(a), (b) or (c) of the Income Tax Assessment Act 1997 are satisfied in relation to the asset. (2) For the purposes of Subdivision 40‑D of the Income Tax Assessment Act 1997 assume that, at the balancing adjustment time, you stop using the asset, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again. (3) For the purposes of section 40‑180 of the Income Tax Assessment Act 1997 assume that the reference in item 3 of the table in subsection 40‑180(2) of that Act to “because you stop using it for any purpose expecting never to use it again” were instead a reference to “because of section 40‑185 of the Income Tax (Transitional Provisions) Act 1997”. (4) If a balancing adjustment event happens to a depreciating asset you hold because of this section, this Subdivision cannot apply to work out the decline in value of the asset for a later income year. (1) You may choose that the decline in value of a particular depreciating asset for an income year is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year. (1) Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40. (a) you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset: (ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and (4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day. (5) The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if: (i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or (ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and  > sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose. (7) Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens: (a) if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b). (i) an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and (ii) the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and (3) The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount. (a) on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and (c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and (ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal; (2) There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal. (3) Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount. If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997. (a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and (b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and: (i) the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, the R&D entity is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—a clawback amount under section 355‑447 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑466 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. (b) section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions. > Note 2: The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and: (i) the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset; (ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, an R&D entity (the partner) that is a partner in the R&D partnership and is entitled to one or more new law deductions for one or more income years for the asset, is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—a clawback amount under section 355‑449 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑468 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s new law deductions mentioned in paragraph (2)(b) of this section. (4) Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event. > Note: Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions. (1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant. (b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and (3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it. (a) there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and (b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act. (2) The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor. (3) The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and <table cellspacing="0" cellpadding="0" style="width:364.2pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:353.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading" style="page-break-inside:avoid"><span>Conditions for small business taxpayers retaining accelerated rates</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Condition</span></p></td></tr></thead><tbody><tr><td style="width:21.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:321.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>The transferee must have been a small business taxpayer for the income year (the </span><span style="font-weight:bold; font-style:italic">start year</span><span>) that includes the time when the entity first used the plant, or first had it installed ready for use.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>2</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>At that time, neither of these applies:</span></p><p class="Tablea"><span>(a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;</span></p><p class="Tablea"><span>(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection</span><span> </span><span>(5).</span></p></td></tr></tbody></table> ``` (4) For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership. (5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement. (a) for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or (i) replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and (ii) increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).  (b) if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11). (c) that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and (d) that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and (e) that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity. (a) for taxable supplies (if any) the entity makes during the year in the course of carrying on a business—the value (as defined by section 9‑75 of the GST Act) of the supplies; and (b) for other supplies the entity makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies. (1) The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for: (a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (c) for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or (d) for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant. (3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115. (4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain. (5) Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee. (i) the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or (a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and (1) A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act. (2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year. For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if: Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act. (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset): and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply. (i) for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or (ii) for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and (c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act. (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and (2) Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act. The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under: (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on: (2) You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act. (3) A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under: (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and (2) Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act. A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act. The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001. If: (d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act; (a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and (a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and (b) the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and (c) paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997. Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years. (1) For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section. (b) the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (b) that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (1) There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea" style="page-break-after:avoid"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a); and</span></p><p class="Tablea" style="page-break-after:avoid"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (b) disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (f) an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division. (4) If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45‑5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest. (5) If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45‑10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest. Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Disregard the use of the following amounts in determining (for the purposes of Subdivision 50‑A of the Income Tax Assessment Act 1997 whether a fund established before 1 July 1997 operates and pursues its purposes in Australia: Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years. (2) However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date. Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if: (b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time. Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years. 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years (1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act. <table cellspacing="0" cellpadding="0" style="margin-left:56.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:258.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Application provisions for specific sections</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-size:9pt; font-weight:bold">Item</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">This section of the </span><span style="font-size:9pt; font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-size:9pt; font-weight:bold"> ...</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">Applies as described in this provision of this Act ...</span></p></td></tr></thead><tbody><tr><td style="width:24.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55(1)</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>95</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>8</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td></tr></tbody></table> ``` (a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and (b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997. > Note: Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year. (b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997; sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997). > Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock. (3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997. (a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and (b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936; > Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal. #### 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997. (1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year. (2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936. (3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year: (a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners; (b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed. > Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year. > Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year. (b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year; the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year. (2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. (3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2). #### 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997. #### 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business (1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. (2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity. > Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997. (1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. (2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value. > Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997. #### 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year. (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. > Note: Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. > Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given). (5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act). (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment. > Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%. (5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%. (6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.  > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section. (b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4). Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age. Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later. Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies. Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3. (4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997. (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%. > Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986. (5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D. > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. (a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and (b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year). (3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and (2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual: (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income. > Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F. > Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997. > Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997. #### 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 (1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012. (2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies. (3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act. (b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009. (2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if: (i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest; (iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or (i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest; (iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009. (2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time. (4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2): (a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and (b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being: (ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and (c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and (d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if: (i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or (ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and (e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and (i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and (ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and (g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest. (a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced: (i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or (ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and (b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5. (2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right. (3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right. (2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. (3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section. Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years. (1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision. > Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision). > Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936). > Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997. (a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936. (1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936. (2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997. > Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997. (3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and (d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; (f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time. > Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and (d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015. (a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or (4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if: (b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset. The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year. (a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and (1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied: (b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and (d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works). (3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936. Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936. (b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006. (2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement. > Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement. Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual: (b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her. 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act (1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee). (2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year: (3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection. #### 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997. Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936). (2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if: (a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; (a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011); (b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986. > Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section. If: (a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and (b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936; Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995. (1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997. (2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997. (3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997. (4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997. > Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one. Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year: (a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and (b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year; the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation. Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset. (b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section); > Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply. (1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if: (a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and (2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value. (4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value. (a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997. (2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less. (1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936: (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. (1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if: (2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by: (a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or (a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or (2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period. Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year: If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997. (1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002. (2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset. (3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required. (i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and (ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and (c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and (f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997). (a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or (1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:  > total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part. (a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or (2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section. (3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1). (1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences. > Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997. (c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets). (4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act. (5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act. Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement. (a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and (2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time. (a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and (ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs. (2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer. (a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and (b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest; (2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event. (3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly. (4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly. <table cellspacing="0" cellpadding="0" style="width:362.55pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:351.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Creating a CGT asset</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">CGT event number</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Applicable amount</span></p></td></tr></thead><tbody><tr><td style="width:50.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D1</span></p></td><td style="width:290.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the incidental costs the originating company incurred that relate to the CGT event</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D2</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the option</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D3</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the right</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>F1</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred on the grant, renewal or extension of the lease</span></p></td></tr></tbody></table> ``` (5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day. A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision. (a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996. (b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. (b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend. (3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities. (1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company. (2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred. (3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company. (1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of: (2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of: (3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note. (1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised. (b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and (ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act. You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and (b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996. (c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and (c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over. (3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. (a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and (c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and (d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act. (3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division. Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years. A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: (1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day. (2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice. (a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and (b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and (a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and (b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and (c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group. (5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004. (6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection. (1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss): (b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions); and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time: (i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or (e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and (f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and (ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred; (2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if: (a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these: (i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset; (ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and (3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act. (a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and (b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section. (5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of: (a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and (b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset. Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. (ii) that could have been deducted, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the deduction had not been limited by the company’s income for that income year; and (ii) that could have been applied, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the application of the loss had not been limited by the company’s capital gains for that income year. 170‑C Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred #### 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years. #### 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). #### Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997. Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997. If: (a) all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (d) that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and (e) the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place. Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years. > introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament. Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day. #### Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting #### 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B. (1) The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day. (2) No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted. #### 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting (1) Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if: (a) the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and (b) none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount. (2) No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount. (1) This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account. (2) For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. > Note 2: If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60. (3) For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)). (4) For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. (5) The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if: (a) during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and (b) the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section. (a) the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and (b) during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components. (7) For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. (8) Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it: (b) the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component. (9) Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component. (10) For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002: (b) lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination; (c) a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination); (e) the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination); (f) the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination). Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period: 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows: (a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and (i) in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and (ii) in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. > Note: A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002. #### 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002: (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:23.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:87.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A franking surplus</span></p></td><td style="width:220.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.009.png" width="175" height="58" alt="Start formula Amount of the class A franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.010.png" width="190" height="56" alt="Start formula Amount of the class B franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.011.png" width="190" height="56" alt="Start formula Amount of the class C franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` #### 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus): (a) a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Original surplus</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:85.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>class A</span></p></td><td style="width:220.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.012.png" width="169" height="38" alt="Start formula Amount of the original class A surplus times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.013.png" width="169" height="38" alt="Start formula Amount of the original class B surplus times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.014.png" width="169" height="38" alt="Start formula Amount of the original class C surplus times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (4) If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit): (a) a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company. (5) The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking deficit into 1997 Act franking debit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Original deficit</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking debit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(4)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:70.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A</span></p></td><td style="width:235.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.015.png" width="164" height="38" alt="Start formula Amount of the original class A deficit times start fraction 39 over 61 end fraction end formula "></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.016.png" width="164" height="38" alt="Start formula Amount of the original class B deficit times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.017.png" width="164" height="38" alt="Start formula Amount of the original class C deficit times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (2) A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if: (c) the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions. (3) The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if: (b) the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and (1) While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit. (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year. (3) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: > Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act. (1) The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account. (a) a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time; (3) If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if: (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity. #### 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If: the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time. (1) Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections. (2) If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year. Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year. Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year. (5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in: that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement. (6) The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (7) The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (2) The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (3) The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (i) are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and (a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and (b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section. (a) whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and (1) This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002. (a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and (3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded. (1) This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002; (2) If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (3) If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (4) If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. (5) If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows: (a) any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and (i) in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and (ii) in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. #### 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF.  #### 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act). (2) If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus): (a) a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF. (4) If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit): (a) a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF. This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period). (1) The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period: (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (1) The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period. (2) The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner. (3) The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5. (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and (d) the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner; the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received. (3) A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time: (1) A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends. (2) However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period. (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (a) the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed: (d) the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and (e) the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return. (2) The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day. (1) The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period. (2) The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made. Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period. (b) on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax); the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed: (c) the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and (d) the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return. (2) The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day. The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period: If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day. If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and If: (a) a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and (b) the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment; In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment. If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment. The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with. If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953. (1) Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period. (a) the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and (b) the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3); the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on: (c) if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or If: Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax. Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division. If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997. (a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day: (3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002. (a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002: > Note: As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date. (b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997. In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003. (1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year. (a) a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of: (i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time; (iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period; (2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if: (b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time: (ii) the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. > Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. > Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. (7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table: <table cellspacing="0" cellpadding="0" style="width:365.35pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount of the franking credit and the exempting debit</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">If:</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the credit and debit is:</span></p></td></tr></thead><tbody><tr><td style="width:22.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The period starts immediately after 7.30</span><span> </span><span>pm by legal time in the Australian Capital Territory on 13</span><span> </span><span>May 1997</span></p></td><td style="width:141.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Both these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was not in surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>All these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was in surplus at the start of the period;</span></p><p class="Tablea"><span>(c) the surplus in the account at the switch time is greater than the surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the franking surplus in the Australian company’s franking account at the switch time; and</span></p><p class="Tablea"><span>(b) the franking surplus in the Australian company’s franking account at the start of the period</span></p></td></tr></tbody></table> ``` (a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and (b) the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period. Subdivision 235‑I of the Income Tax Assessment Act 1997 applies to assets acquired by the trustee of an instalment trust in: (1) Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years. (2) However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time). (3) The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997. Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997. (2) Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in: (1) Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that: (b) is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose. (a) if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007. > Note: To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997. (b) contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option; the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option. (3) For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5). (4) If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is: (a) the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less (b) the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest. (5) If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is: (6) If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil. (1) If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one. (2) If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year. (3) If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year. (a) for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and (b) for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year: Step 1. Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. Step 2. Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3). Step 3. If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year. > Note: Example: Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75): (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred: (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times: (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate. Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008. (a) the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and (b) the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities: (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (i) the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or (ii) the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and (f) none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made: (i) Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event; (ii) a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year. (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (b) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (c) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year #### 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year (a) the requirements set out in paragraphs 275‑610(1)(a), (b) and (c) of the Income Tax Assessment Act 1997 are satisfied in respect of an amount of non‑arm’s length income of a managed investment trust in relation to an income year; and (b) the managed investment trust became a party to the scheme mentioned in paragraph 275‑610(1)(a) of that Act before the day on which the Bill that became the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 was introduced into the House of Representatives; and Division 276 of the Income Tax Assessment Act 1997 as inserted in that Act by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (the amending Act) applies as set out in subitem 1(1) of Schedule 8 to the amending Act. (b) if the trustee of the trust has made a choice for the purposes of paragraph 1(1)(b) of Schedule 8 to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016—the first income year starting on or after 1 July 2015; or (c) if the trustee of the trust has made a choice for the purposes of subparagraph 276‑10(1)(e)(i) of the Income Tax Assessment Act 1997 in respect of the 2016‑17 income year—that income year. (c) the trust is an AMIT for an income year (the discovery year) that is the starting income year or a later income year. (1) This section applies if the trust has an under or over of a character in the discovery year relating to the base year. (b) if, at a time, the trust sent its members distribution statements for an income year that is prior to the starting income year—assume that the trust sent those members AMMA statements for that income year at that time. (3) For the purposes of Division 276 of the Income Tax Assessment Act 1997, treat the under or over mentioned in subsection (1) as an under or over of the AMIT, in the discovery year relating to the base year, of the character mentioned in that subsection. (a) had the under or over mentioned in subsection (1) been discovered before the starting income year, this Act would have operated to produce a particular effect (the pre‑AMIT scheme effect) for the base year in relation to the amount or amounts reflected in the under or over; and 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT #### 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT (b) working out the amount (if any) of the entity’s capital gain under subsection 104‑70(4) of the Income Tax Assessment Act 1997. (3) For the purpose of working out the amount of the non‑assessable part mentioned in paragraph 104‑70(1)(b), treat the following provisions as being in operation at the time the payment was made: (b) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in paragraph (a). (4) Subsection (3) does not apply to the extent (if any) that the entity, in the income tax return that it lodged for the income year in which the payment was made, included the amount of the payment in its assessable income for that income year. (5) For the purposes of section 118‑20 of the Income Tax Assessment Act 1997, treat this section as being in Part 3‑1 of that Act. (2) The Commissioner cannot amend the entity’s assessment for the income year in which the payment was made in a particular way if: (b) the Commissioner could not amend the assessment in that way if the following provisions were in operation at the time the payment was made: (ii) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in subparagraph (i); and Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82‑10F). (2) The object of this section is to apply (with modifications) provisions limiting deductibility in respect of certain contributions made during the period that: (a) Subdivisions AA and AB of Division 3 of Part III of the Income Tax Assessment Act 1936, as in force just before they were repealed by the Superannuation Legislation Amendment (Simplification) Act 2007; (b) any other provision of the Income Tax Assessment Act 1936, or of any instrument made under that Act, to the extent that it relates to the operation of those Subdivisions; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of those Subdivisions. (b) the deduction limit mentioned in section 82AAC for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (c) the deduction limit mentioned in section 82AAT for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (d) Division 290 of the Income Tax Assessment Act 1997 did not apply to contributions made during the income year mentioned in paragraph (a). (2) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of a defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection and subsection (4), the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 5 September 2006; (b) the defined benefit interest mentioned in paragraph (2)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 5 September 2006, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (2)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (4) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of the defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection, the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 12 May 2009; (b) the defined benefit interest mentioned in paragraph (4)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 12 May 2009, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (4)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (1) The object of this section is to apply (with modifications) provisions relating to excess non‑concessional contributions tax in respect of certain contributions made during the period that: (b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision. (ea) in a case where paragraph 292‑95(1)(b) of that Act would have allowed the contribution mentioned in that paragraph to be made at a time within that period—that paragraph allowed the contribution to be made on or before 30 June 2007; and (f) paragraph 292‑95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and (fa) in a case where subsection 292‑100(2), (4), (7) or (8) of that Act would have allowed the contribution mentioned in that subsection to be made at a time within that period—that subsection allowed the contribution to be made on or before 30 June 2007; and (g) paragraph 292‑100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and (h) contributions made during that period that are covered under section 292‑100 of that Act reduce the person’s CGT cap amount for the 2007‑2008 financial year in accordance with subsection 292‑105(2) of that Act (and despite subsection (1) of that section); and (i) if the conditions in subsection (4) are satisfied—the person’s excess non‑concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and (b) the Commissioner gives the person a transitional release authority under subsection 292‑80A(2) in response to the application; and (c) the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292‑80B within 21 days after the date of the release authority; and (d) the superannuation provider pays the person the amount required under section 292‑80C in relation to the transitional release authority. (b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act). (6) The amount to be included in the first person’s amount of non‑concessional contributions under subparagraph (3)(b)(ii) is the sum of: (a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and (b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made. (c) under Division 295 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)), the contribution is included in the assessable income of the superannuation provider in relation to the superannuation plan to which the contribution is made; and (8) For the purposes of paragraph (7)(b), treat the person as an employee of the other entity if the person would be treated as an employee of the other entity under Division 290 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)). (1) A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007. (2) The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292‑80(3)(b)(i), the person would have excess non‑concessional contributions for the financial year mentioned in paragraph 292‑80(3)(a). (4) For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out: The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 21 days after the date of the release authority. (1) A superannuation provider that has been given a transitional release authority in accordance with section 292‑80B must pay to the person within 30 days after receiving the release authority the least of the following amounts: (a) if the person requests the provider in writing to pay a specified amount in relation to the release authority—that amount; (c) the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person in complying superannuation plans. > Note 1: Section 288‑95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection. > Note 2: Section 288‑100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority. > Note 3: For reporting obligations on the superannuation provider in these circumstances, see section 390‑65 in Schedule 1 to the Taxation Administration Act 1953. (2) The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person in complying superannuation plans. (3) Section 307‑125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section. (a) your non‑concessional contributions cap for the 2015‑2016 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsection 292‑85(7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 applies after the commencement of this section as if: (d) subsection 292‑85(6) of that Act as so amended had been applied (taking into account paragraph (c) of this subsection) for the purposes of working out your non‑concessional contributions cap for the 2016‑2017 financial year. (2) For the purposes of working out your non‑concessional contributions caps for the 2017‑2018 financial year and the 2018‑2019 financial year, if: (a) your non‑concessional contributions cap for the 2016‑2017 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsections 292‑85(6) and (7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 apply after the commencement of this section as if the amount worked out under subsection 292‑85(5) of that Act as so amended were $380,000. (3) To avoid doubt, this section does not affect your non‑concessional contributions cap for any financial year that ended before 1 July 2017. The tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your non‑concessional contributions (see section 292‑90 of the Income Tax Assessment Act 1997) for the financial year. (2) Subject to section 294‑55, the amendments of Division 294 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Treasury Laws Amendment (2017 Measures No. 2) Act 2017 apply on and after 1 July 2017. Despite sections 294‑30 and 294‑140 of the Income Tax Assessment Act 1997 (which are about when you have excess transfer balance), you do not have excess transfer balance in your transfer balance account on any day in the period of 6 months beginning on 1 July 2017 if: (a) the only transfer balance credits in the account in that period arose under item 1 of the table in subsection 294‑25(1) of that Act (which is about superannuation income streams you have just before 1 July 2017); and (b) the sum of those transfer balance credits exceeds your transfer balance cap, but is less than or equal to $1,700,000; and (c) at the end of the period, the sum of all the transfer balance debits arising in your transfer balance account equals or exceeds the amount of the excess from paragraph (b). (1) Despite subsection 294‑10(2), a transfer balance credit arises under item 4 of the table in subsection 294‑25(1) of the Income Tax Assessment Act 1997 only in relation to a borrowing that arises under a contract entered into on or after 1 July 2017. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2017 is treated as if it arose under a contract entered into before 1 July 2017 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) on 1 July 2017, a transfer balance debit arose in your transfer balance account under item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997; and (b) the sum of all the transfer balance credits that arise in your transfer balance account under item 1 of the table in subsection 294‑25(1) of that Act exceeds the amount that would, apart from this section, be the amount of that debit. (2) Despite column 2 of item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997, the amount of the transfer balance debit is instead equal to the sum worked out under paragraph (1)(b) of this section. 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain > The object of this Subdivision is to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the following legislative changes: (a) the introduction of a transfer balance cap (as a result of Schedule 1 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016); (b) the exclusion of transition to retirement income streams (and similar income streams) from being superannuation income streams in the retirement phase (as a result of Schedule 8 to that Act). (a) starting on the start of the day on which the Bill that became the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 was introduced into the House of Representatives; and (a) at the start of the pre‑commencement period, a CGT asset of a fund is a segregated current pension asset of the fund; and (i) at a time (the cessation time) in the pre‑commencement period, the asset ceases to be a segregated current pension asset of the fund; or (ii) at the start of 1 July 2017 (also the cessation time), the asset ceases to be a segregated current pension asset of the fund because it supports a superannuation income stream covered by subsection 307‑80(3) of the Income Tax Assessment Act 1997; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (b) the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year is greater than nil; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and #### 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑115(3)(a), the fund makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the fund’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Subsection 295‑390(1) of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). > 2016‑17 non‑exempt proportion means 1 minus the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year. #### 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset (i) the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997 in respect of the trust for the 2016‑17 income year; (ii) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year; and (d) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and #### 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑125(3)(a), the trust makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the trust’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Section 295‑400 of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). (a) unless paragraph (b) applies—1 minus the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997; or (b) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage worked out by subtracting the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year from 100%. This Subdivision applies to an entity that is the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust. For the purposes of this Subdivision, an asset is a 30 June 1988 asset of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust if the entity owned it at the end of 30 June 1988. > Note: Section 295‑90 of the Income Tax Assessment Act 1997 treats these assets as having been acquired on 30 June 1988. (1) The first element of the cost base of each 30 June 1988 asset of the entity’s is the greater of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). (2) The first element of the reduced cost base of each 30 June 1988 asset of the entity’s is the lesser of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). the market value of the asset as at the end of 30 June 1988 is the average of the highest and lowest trade prices for identical assets recorded on 30 June 1988 in whichever of the following markets is applicable: (d) if, on that date, there was a State capital city market (other than the Sydney market) that recorded a higher volume of trading than the Sydney market in identical assets—that State capital city market; (2) For the purposes of this section, an asset is taken to have been listed on an Australian stock exchange on 30 June 1988 if, and only if, on that day the asset had the status of having been granted official quotation by a securities exchange within the meaning of the former Securities Industry Act 1980 or the law of a State or Territory corresponding to that former Act. (b) at any time during the period commencing at the time when the shares were acquired and ending at the end of 30 June 1988, the company paid an amount that was not a dividend to the entity in respect of the shares; (b) at any time during the period commencing at the time when the interest or unit was acquired and ending at the end of 30 June 1988, the trustee of the trust paid an amount to the entity in respect of the interest or unit, being: (i) in a case where the entity was exempt from tax for the year of income in which the payment was made—an amount that, if the entity had not been exempt from tax, would not have been the entity’s assessable income; or the cost base to the entity of the interest or unit as at 30 June 1988 is reduced by so much of the amount as is not attributable to a deduction allowed under former Division 10C or 10D of the Income Tax Assessment Act 1936. (1) Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (2) and (3) of this section apply if an entity exercises rights or options as mentioned in that section to acquire: (b) the greater of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (b) the lesser of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (4) The payment referred to in subsection (2) or (3) can include giving property. To the extent that the payment does, use the market value of the property in working out the amount of the payment. (1) A notice given under subsection 82AAT(1A) or (1CB) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑170 of the Income Tax Assessment Act 1997. (2) A notice given under subsection 82AAT(1C) or (1CD) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑180 of the Income Tax Assessment Act 1997. (1) A proportion of the ordinary income and statutory income of a continuously complying fixed interest ADF of an income year that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).  > Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the income year. > Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the income year. (4) A choice for the purposes of the definition of reckoning time in subsection (5) must be made on or before the date of lodgment of the income tax return of the ADF for the income year to which the choice relates, or before a later day allowed by the Commissioner. > continuously complying fixed interest ADF, in relation to an income year (the current year), means a fund that is a fixed interest complying ADF in relation to each of the following years: > current 25 May balance, in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time: (b) subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 September 1989 is to be added to the balance; (b) a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that day, made a deposit with the ADF that consisted wholly or partly of the roll‑over (as defined in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 as in force on that day) of an eligible termination payment as so defined, being an eligible termination payment that included a concessional component (as so defined). > fixed interest complying ADF, in relation to a year of income, means a complying ADF where both of the following conditions are satisfied: (a) not less than 90% of the amount that, apart from this section, would be the assessable income of the ADF of the income year (other than non‑arm’s length income or amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997) consists of any one or more of the following: (ii) any profit arising on the disposal, redemption, cancellation or maturity of a CGT asset referred to in paragraph 295‑85(3)(b) of the Income Tax Assessment Act 1997; (iii) an amount included in assessable income under Division 16E of Part III of the Income Tax Assessment Act 1936 (or would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply); (ii) virtual PST life insurance policies (as defined in the Income Tax Assessment Act 1997) issued by a life insurance company. > original 25 May balance, in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988. > reckoning time, in relation to an ADF in relation to an income year, means the beginning of the income year, or such other time during the income year as the ADF chooses in accordance with subsection (4). (6) This section does not apply to an ADF in relation to an income year unless the whole of the benefit that would accrue to the ADF from the application of this section in relation to the income year has been, or can reasonably expected to be, passed on to eligible depositors. An election made by the trustee of a complying superannuation fund under subsection 279(4) of the Income Tax Assessment Act 1936 that had effect for the income year of the fund in which 30 June 2007 occurs continues to have effect as if it had been made under section 295‑465 of the Income Tax Assessment Act 1997. Subdivisions 295‑I (no‑TFN contributions) and 295‑J (Tax offset for no‑TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006‑2007 income year ends on a day (the end day) after 1 July 2007 as if: (b) the entity’s no‑TFN contributions income for the entity’s 2007‑2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007‑2008 income year if the contributions concerned had been made in the entity’s 2007‑2008 income year. (2) Division 301 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section because you are a member of the fund in the same way as it would apply if the payments were superannuation member benefits paid to you from a complying superannuation fund. For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. Subdivision 301‑F of the Income Tax Assessment Act 1997 applies in relation to income years starting on or after 1 July 2007. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to the following in respect of an income year that starts on or before 1 July 2021: (b) the amendments of the Income Tax Assessment (1997 Act) Regulations 2021 made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023. (a) a superannuation benefit (the trigger benefit) was paid to a person in the 2020‑21 income year or an earlier income year; and (c) the trigger benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; and (2) The Commissioner cannot amend an assessment on the basis that a superannuation benefit paid to the person is a superannuation income stream benefit because of the amendments made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 if: (iii) the superannuation benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (a) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (b) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. (1) The Minister may, by legislative instrument, make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions) that: (a) relate to the amendments or repeals made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023; and (2) Without limiting subsection (1), rules made under this section before the end of the period of 12 months starting on the day that Schedule commences may provide that provisions of that Schedule, or any other Act or instrument, have effect with any modifications prescribed by the rules. Those provisions then have effect as if they were so modified. (2) Division 302 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section after another person’s death, because the other person was a member of that fund, in the same way as it would apply if the payments were superannuation death benefits paid to you from a complying superannuation fund. For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if: (b) just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. (2) For the purposes of Subdivision 82‑B of Division 82, Division 302 and section 303‑5 of the Income Tax Assessment Act 1997, the definition of death benefits dependant in section 302‑195 of that Act applies as if paragraphs (a) and (b) of the definition were replaced with the following paragraphs: (a) a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008 or a person who was formerly such a spouse; or (b) a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008, who is aged less than 18. (ii) a superannuation guarantee payment, a small superannuation account payment, an unclaimed money payment, a superannuation co‑contribution benefit payment or a superannuation annuity payment. (2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you at a time in the period: (i) a condition of release specified in item 107A or 207AA of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; or (ii) a condition of release specified in item 109AA of the table in Schedule 2 to the Retirement Savings Accounts Regulations 1997. (1) This section applies to a superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with section 292‑80B. (2) The superannuation benefit is not assessable income and is not exempt income to the extent that it does not exceed the amount mentioned in subsection (3). (3) The amount is the amount of excess non‑concessional contributions stated in the release authority in accordance with paragraph 292‑80A(3)(a), reduced (but not below zero) by the amount of any superannuation benefit that was not assessable income and not exempt income under a previous operation of subsection (2) in relation to the release authority. (4) The superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3). (a) you have an interest in a FIF (within the meaning of Part XI of the Income Tax Assessment Act 1936, as in force just before the commencement of item 37 of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010) (the paying fund); and (b) Subdivision 305‑B of the Income Tax Assessment Act 1997 applies in relation to the paying fund (see section 305‑55 of that Act); and (c) the paying fund transfers an amount to a complying superannuation fund in respect of you during the deduction year; and (d) you choose under section 305‑80 of the Income Tax Assessment Act 1997 that the amount, or part of the amount, is to be treated as assessable income of the complying superannuation fund; and (e) immediately before the transfer happens, there is a post‑FIF abolition surplus (within the meaning of the Income Tax Assessment Act 1936) for the paying fund in relation to you; and For the purposes of the definition of specified roll‑over amount in the Income Tax Assessment Act 1997, treat the taxable component of a directed termination payment (within the meaning of section 82‑10F) as the element untaxed in the fund of a superannuation benefit that is a roll‑over superannuation benefit. (1) This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007. > Note: This section also applies to an income stream replacing an earlier one because of an involuntary roll‑over (see section 307‑127). (2) Despite subsection 307‑125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows: (a) first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007); (b) next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits. The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit. (3) Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened: (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day; (ba) the holder of the superannuation interest is aged 60 or above on 1 July 2007, if none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day. (a) treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and (b) work out the tax free component of the superannuation interest for the purposes of section 307‑125 of the Income Tax Assessment Act 1997 under subsections (6) and (6A). (i) an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and (ii) the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time; (b) next, work out the unused undeducted purchase price (within the meaning of paragraph (a) of the definition of that term in subsection 27A(1) of the Income Tax Assessment Act 1936 just before the commencement of this section, and disregarding paragraphs (b) and (c) of that definition) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007; (c) next, work out the pre‑July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this section) of the eligible termination payment. (a) at least one superannuation income stream benefit was paid from the superannuation income stream before 1 July 1994; or (b) section 27AAAA of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007) applied to the superannuation income stream just before 1 July 2007; (7) For the purposes of paragraph (6)(c), disregard the value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment. (8) If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as: (b) if 1 or more other events mentioned in subsection (3) happened before the commutation—the time just before the earliest of those events happens. (a) references in that section to the later income stream (in relation to a time, or event happening, before the payment of that involuntary roll‑over superannuation benefit) include references to the earlier income stream; and (b) references in that section to the superannuation interest supporting the later income stream (in relation to a time, or event happening, before the payment of that benefit) include references to the earlier interest. (1) This section applies for the purposes of working out the amount of your total superannuation balance just before 1 July 2017. (2) The transfer balance mentioned in paragraph 307‑230(1)(b) of the Income Tax Assessment Act 1997 just before 1 July 2017 is taken to be equal to: (a) the sum of the transfer balance credits (if any) in your transfer balance account just after the start of 1 July 2017; less (b) the sum of the transfer balance debits (if any) arising in your transfer balance account on 1 July 2017 under item 4 of the table in subsection 294‑80(1) of that Act (about payment splits). (1) Section 307‑231 of the Income Tax Assessment Act 1997 applies in relation to borrowings that arise under contracts entered into on or after 1 July 2018. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2018 is treated as if it arose under a contract entered into before 1 July 2018 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) treat a deduction made under former section 279 of the Income Tax Assessment Act 1936 as having been made under section 295‑465 of the Income Tax Assessment Act 1997 instead; and (b) treat a deduction made under former section 279B of the Income Tax Assessment Act 1936 as having been made under section 295‑470 of the Income Tax Assessment Act 1997 instead. If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007‑2008 income year is, despite subsection 307‑345(1), the total of: (b) the amount by which $140,000 exceeds the upper limit for the 2006‑2007 income year (worked out under section 159SG of that Act). Division 316 of the Income Tax Assessment Act 1997 applies in relation to demutualisations occurring on or after 1 July 2008. If: (a) any assets held by the benefit funds of a life insurance company that is a friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a complying superannuation fund; and (b) the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer; the transfer is disregarded for any purposes of the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936. (1) In working out the amount that a life insurance company can deduct, in respect of life insurance policies that are disability policies (other than continuous disability policies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income. (2) In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection (1) applies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company’s liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320‑85(4) of that Act. If: (2) If the life insurance company wishes to include a part of an approved asset in its virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑87(2) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society establishes a virtual PST in the 2000‑01 income year, the calculation of the transfer values of the company’s virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year. (1) Subsection (3) applies for the purposes of subparagraph (b)(i) of the definition of virtual PST life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 259 of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007. (2) Subsection (3) also applies for the purposes of subparagraph (b)(i) of the definition of complying superannuation/FHSA life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 47 of Schedule 7 to the First Home Saver Accounts (Consequential Amendments) Act 2008. (3) Treat an annuity as having been purchased out of a superannuation lump sum or an employment termination payment, if the annuity was purchased: (b) out of an eligible termination payment (within the meaning of the Income Tax Assessment Act 1997, as in force just before the commencement mentioned in subsection (1) of this section). (2) If the life insurance company wishes to include a part of an approved asset in its segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (a) a life insurance company had a liability before 1 July 2000 under a life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and (c) there is a transfer of the company’s assets to the segregated exempt assets to meet that liability or that part of the liability; (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑105(1) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320‑225 of the Income Tax Assessment Act 1997 in the 2000‑01 income year, the calculation of the transfer values of the company’s segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year. Section 322‑25 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Part VC of the Insurance Act 1973 after 17 October 2008. 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you > new Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force after the commencement of this section. > old Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. > STS taxpayer means an STS taxpayer within the meaning of Division 328 of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. #### 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years (1) This section applies for the purpose of working out whether you are a small business entity (other than because of subsection 328‑110(4) of the Income Tax Assessment Act 1997) for the 2007‑08 or 2008‑09 income year. (2) You work out your aggregated turnover for the 2005‑06 or 2006‑07 income year as if the amendments made by Schedule 1 to the Tax Laws Amendment (Small Business) Act 2007 had been in force in relation to that year. (a) your aggregated turnover for the 2005‑06 income year (worked out in accordance with subsection (2)) is $2 million or more; but (b) your STS group turnover for that year (worked out under Subdivision 328‑F of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section) is less than $2 million. (2) The following provisions apply as if you are a small business entity for the income year in which you are winding up the business: #### 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you (1) For the purpose of working out whether you are a small business entity for the 2007‑08, 2008‑09, 2009‑10 or 2010‑11 income year (each a relevant income year) for the purposes of a provision to which subsection (3) applies: (2) An entity (the first entity) controls a discretionary trust for a relevant income year if, for any of the 4 income years (a previous income year) before that year: (a) if the previous income year is before the 2007‑08 income year—the trustee of the trust made a distribution of $100,000 or more to the first entity, any of its affiliates, or the first entity and any of its affiliates; or (i) the trustee of the trust paid to, or applied for the benefit of, the first entity, any of the first entity’s affiliates, or the first entity and any of its affiliates, any of the income or capital of the trust; and (ii) the percentage (the control percentage) of the income or capital paid or applied is at least 40% of the total amount of income or capital paid or applied by the trustee for that year. (1) This section sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (2) This section also sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (3) Any ordinary income that, apart from paragraph 328‑105(1)(a) of the Income Tax Assessment Act 1997 (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have derived before the changeover year (while you were using the STS accounting method) and you have not included in your assessable income because you have not received it is included in your assessable income for the changeover year. (4) Any general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, that, apart from paragraph 328‑105(1)(b) of that Act (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have incurred before the changeover year (while you were using the STS accounting method) and that you have not deducted because you have not paid them can be deducted for the changeover year. (b) for any later income year for which you are a small business entity but only if you used the STS accounting method for the income year before that later year. > Note: Example: You are a small business entity for the 2007‑08 and 2008‑09 income years and you continue to use the STS accounting method for those years. You are not a small business entity for the 2009‑10 income year so you cannot continue to use the STS accounting method for that year. Because you cannot use the STS accounting method for the 2009‑10 income year, you will not be able to use it again for a later income year even if you are a small business entity for that later year. In sections 328‑115 and 328‑120, STS accounting method means the accounting method that was required by the Income Tax Assessment Act 1997 to be used by STS taxpayers for the 2004‑05 income year. (b) you made a choice under subsection 328‑175(3) of old Subdivision 328‑D in relation to a depreciating asset you use to carry on a primary production business and for which you could deduct amounts under Subdivision 40‑F or 40‑G of the Income Tax Assessment Act 1997. (2) In determining whether you can choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997 in an increased access year, disregard subsection 328‑175(10) of that Act. (3) In applying paragraph 328‑175(10)(b) of that Act for the purpose of determining whether you can choose to use that Subdivision in any income year after the increased access years, disregard: (4) Paragraph 328‑180(1)(b) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that paragraph to $1,000: (i) first used the asset, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (i) first used the asset, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (i) first used the asset, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, on or after 1 July 2023 and on or before 30 June 2026. (a) a reference in that paragraph to the end of the income year in which you start to use the asset, or have it installed ready for use, for a taxable purpose were a reference to the earlier of: if: (i) first used the asset, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021. (5) Paragraph 328‑180(2)(a) or (3)(a) of the Income Tax Assessment Act 1997 applies to an amount included in the second element of the cost of an asset as if a reference in that paragraph to $1,000: (5A) For the purposes of determining whether, under subsection 328‑180(2) of the Income Tax Assessment Act 1997, you can deduct, for an income year (the current year), the taxable purpose proportion of an amount included in the second element of the cost of an asset, disregard paragraph (b) of that subsection if: (2) For the purposes of determining whether subsection 328‑180(1) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (b) of that subsection (which sets a limit of $1,000 on the cost of the asset) if, in the period beginning at the 2020 budget time and ending on 30 June 2023, you: (3) For the purposes of determining whether subsection 328‑180(2) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (a) of that subsection (which sets a limit of $1,000 on the amount) if the amount is included in the second element of the cost of the asset at any time in the period beginning at the 2020 budget time and ending on 30 June 2023. (4) In applying paragraph 328‑180(3)(a) of the Income Tax Assessment Act 1997 to an asset, disregard an amount included in the second element of the cost of the asset if the amount is deducted under subsection 328‑180(2) of that Act, as modified by subsection (3) of this section. (5) Section 328‑210 of the Income Tax Assessment Act 1997 applies as if the words “less than $1,000 but” in subsection (1) were disregarded, in relation to a deduction for an income year that ends: Subsection 328‑190(2) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that subsection to 15% were a reference to 57.5% if you are covered by section 40‑125 for the asset (which is about backing business investment). (1) A depreciating asset of yours that had been allocated to your general STS pool is treated as being allocated to your general small business pool. (2) A depreciating asset of yours that had been allocated to your long life STS pool is treated as being allocated to your long life small business pool. (3) If you made a choice, under subsection 328‑185(5) of old Subdivision 328‑D, not to have a depreciating asset allocated to your long life STS pool, the choice has effect for the purposes of subsection 328‑185(5) of new Subdivision 328‑D. (1) This section applies if a depreciating asset of yours is treated as being allocated to your general small business pool or long life small business pool under section 328‑185. (2) The opening pool balance of your general small business pool or long life small business pool for the 2007‑08 income year is taken to be the closing pool balance of your general STS pool or long life STS pool, as the case requires, for the 2006‑07 income year, reduced or increased by any adjustment required under section 328‑225 of new Subdivision 328‑D (about change in the business use of an asset). (a) you were not an STS taxpayer for the 2006‑07 income year (because you stopped being an STS taxpayer before that time); but (b) you are a small business entity for the 2007‑08 income year or a later income year and you choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets for that income year; the opening pool balance of your general small business pool or long life small business pool includes the sum of the taxable purpose proportions of the adjustable values of depreciating assets allocated to the pool under subsection 328‑185(3) of new Subdivision 328‑D for that year. (1) This section applies for the purposes of applying Subdivision 328‑D of the Income Tax Assessment Act 1997 for the 2012‑13 income year and later income years. (2) A depreciating asset that had been allocated to your long life small business pool is treated as being allocated to your general small business pool. (a) the closing pool balance of your general small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under section 328‑225 of that Act; and (b) the closing pool balance of your long life small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under that section. (1) This section applies if you chose to stop being an STS taxpayer for the 2005‑06 income year or the 2006‑07 income year. (2) You cannot choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets until at least 5 years after the income year for which you chose to stop being an STS taxpayer. > Note: Subdivision 328‑D of the Income Tax Assessment Act 1997 continues to apply to depreciating assets that have been allocated to your small business pools even if you are not a small business entity, or do not choose to use that Subdivision, for an income year: see section 328‑220 of that Subdivision. (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct 20% of particular expenditure for your 2023‑24 income year if: (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (d) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑450 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (6) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (ii) if the provider is a registered body of a kind listed in paragraph (2)(b), (c) or (d)—the training is within the provider’s scope of registration for that kind of registered body; and (d) each enrolment, or arrangement, for the provision of the training is made or entered into at or after 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022; and > Note: Paragraphs (b) and (c) mean this section will not apply to expenditure for on‑the‑job training or training provided by you in house. (a) a registered higher education provider (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); (b) a NVR registered training organisation (within the meaning of the National Vocational Education and Training Regulator Act 2011); (c) a registered education and training organisation (within the meaning of the Education and Training Reform Act 2006 (Vic.)); (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct for your 2023‑24 income year an amount that is equal to the sum of: (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (3) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑460 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (4) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (b) you incur the expenditure in the period starting at 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022 and ending at the end of: (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (4) For the purposes of paragraphs (1)(c) and (2)(c), in working out whether you can deduct an amount of expenditure on a depreciating asset, assume that: (b) throughout that effective life, you will use the asset for a taxable purpose to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose. (a) 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑470(1) or (3) applies in relation to the income year; and > Note: The deduction relates to the period of 1 July 2023 to 30 June 2024. An entity may have deducted an amount under paragraph (a) for a previous income year if the entity has a substituted accounting period. (2) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑470 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (3) Sections 8‑10, 40‑215 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (c) you start to use the asset, or have it installed ready for use, for any purpose after 30 June 2023 but before 1 July 2024; and (d) you start to use the asset, or have it installed ready for use, for a taxable purpose at a time (the start time) that is: (e) you are a small business entity, or an entity covered by subsection (4), for the income year that includes the start time; and (h) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) a new reasonably comparable depreciating asset that uses a fossil fuel (other than a use of which that is merely incidental) is available in the market at the start time; (ii) if the asset is being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than the other asset; (iii) if the asset is not being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than a new reasonably comparable depreciating asset that is available in the market at the start time; or (i) a depreciating asset (other than an asset excluded under subsection (6)) that uses electricity, or energy that is generated from a renewable source, to be more energy efficient; (iv) the use of electricity, or energy that is generated from a renewable source, by another depreciating asset to be monitored. (a) the amount is included in the second element of a depreciating asset’s cost under paragraph 40‑190(2)(a) of the Income Tax Assessment Act 1997; and (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (d) you are a small business entity, or an entity covered by subsection (4), for the income year in which the expenditure is incurred; and (i) if the asset could use a fossil fuel (other than a use of which that is merely incidental)—the asset to only use electricity, or energy that is generated from a renewable source; (ii) if the asset uses electricity, or energy that is generated from a renewable source—the asset to be more energy efficient; (g) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) For the purposes of paragraph (1)(b) or (3)(b), in working out whether you can deduct an amount of expenditure assume that: (i) for the purposes of paragraph (1)(b)—to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose; or (ii) for the purposes of paragraph (3)(b)—to the same extent as you use it for a taxable purpose in the income year in which the expenditure is incurred. (b) expenditure (other than expenditure referred to in subparagraph (3)(e)(i)) on an asset that can use a fossil fuel (other than a use of which that is merely incidental); (c) an asset that solely or predominantly generates electricity from a renewable source (for example, photovoltaic cells) or expenditure on such an asset; (d) an asset, or expenditure, being capital works for which you can deduct an amount under Division 43 of the Income Tax Assessment Act 1997; > Note: Subsections (1) and (3) also do not apply to an item of trading stock because such an asset is not a depreciating asset: see section 40‑30 of the Income Tax Assessment Act 1997. A reference in each of the following provisions of the Income Tax Assessment Act 1997 to a registration under section 27A of the Industry Research and Development Act 1986 includes a reference to a registration under former section 39J of that Act: (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) the R&D entity cannot deduct an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from: (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D entity could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:22pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the R&D entity is taken to be able to deduct under subsection 355‑315(2) of the new Act that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the R&D entity’s assessable income for the event year under subsection 355‑315(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 for the asset, the R&D entity is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑446 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the R&D entity is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑465 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: Section 355‑315 of the new Act would otherwise apply for the event in a case where the R&D entity had new law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by an R&D partnership; and (i) the partner can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the partner chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D partnership could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the partner is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:21.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D entity</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D partnership</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the partner is taken to be able to deduct under subsection 355‑525(2) of the new Act the partner’s proportion of that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the partner’s assessable income for the event year under subsection 355‑525(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partner’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if one or more partners (including the partner) in the R&D partnership is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset, the partner is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑448 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the partner is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑467 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s deductions under section 355‑520 of the new Act mentioned in subsection (4A) of this section. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the partner for the event, do so apply to the partner for the event. > Note 1: Section 355‑525 of the new Act would otherwise apply for the event in a case where the partner had new law deductions. Item 7 of the table in subsection 57‑110(2) in Schedule 2D to the Income Tax Assessment Act 1936 applies as if the deduction rules set out in the final column of that item also included former sections 73BA and 73BH of the Income Tax Assessment Act 1936. For the purposes of step 1 of the method statement in subsection 355‑415(2) of the Income Tax Assessment Act 1997, also disregard amounts that have already been taken into account under former subsection 73B(14AA) of the Income Tax Assessment Act 1936 for the R&D entity, the grouped entity and the R&D activities for an earlier income year. (1) This section applies if, apart from former paragraph 73B(10)(a) of the Income Tax Assessment Act 1936, an eligible company could deduct advance R and D expenditure in one or more income years commencing on or after 1 July 2011. > Note: That deduction would be under former section 73B of that Act as that former section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (a) apart from Subdivision H (prepaid expenditure) of Division 3 of Part III of the Income Tax Assessment Act 1936, an eligible company can deduct an amount under former section 73B, 73BA, 73BH, 73QA, 73QB or 73Y of that Act for an income year commencing before 1 July 2011; and (c) apart from former paragraph 73B(10)(a) of that Act, the eligible company could deduct an amount, as a result of that application of that Subdivision, for an income year commencing on or after 1 July 2011. > Note: That deduction would be under that Act as it applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (3) Former paragraph 73B(10)(a) of that Act is taken to apply to those income years commencing on or after 1 July 2011 as if the reference in that former paragraph to section 39J of the Industry Research and Development Act 1986 were a reference to section 27A of that Act. (4) An expression used in this section that is also used in former section 73B of the Income Tax Assessment Act 1936 has the same meaning in this section as it has in that former section. This Subdivision applies to core technology (within the meaning of former section 73B of the Income Tax Assessment Act 1936) if: (a) you incurred core technology expenditure (within the meaning of that former section) in an income year commencing before 1 July 2011 in relation to the core technology under one or more contracts entered into at or after the time referred to in former subsection 73B(12) of that Act; and (b) that expenditure (the undeducted expenditure) cannot be deducted for the last income year commencing before 1 July 2011. (1) This section applies for the purposes of Division 40 of the Income Tax Assessment Act 1997, other than sections 40‑292 and 40‑293 of that Act, if the core technology (the asset) is a depreciating asset. (2) Disregard this section, including its effect on the amount you can deduct under section 40‑25 of that Act for the asset, for the purposes of working out: (3) The asset’s opening adjustable value for the first income year that commences on or after 1 July 2011 (the first new income year) is equal to the amount of the undeducted expenditure. (4) Subsection 40‑75(2) of the Income Tax Assessment Act 1997 applies to the asset as if the first new income year were a change year (within the meaning of that subsection). If the core technology is not a depreciating asset, you can deduct the undeducted expenditure in equal proportions over a period of 5 income years starting in the first income year commencing on or after 1 July 2011. To work out the film component (if any) of your tax loss for the 1997‑98 income year or a later income year, apply former section 375‑805 of the Income Tax Assessment Act 1997. If you incurred a film loss for the purposes of former section 79F (Film losses of 1989‑90 to 1996‑97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989‑90 to 1996‑97 income years, that film loss is the film component of your tax loss for that income year. (1) To work out your film loss (if any) for the purposes of the Income Tax Assessment Act 1997 for the 1989‑90 or a later income year, apply former section 375‑810 of that Act. (2) You can deduct in the 1997‑98 or a later income year your film loss for any of the 1989‑90 to 1996‑97 income years only to the extent that it has not already been deducted. (1) Division 392 of the Income Tax Assessment Act 1997 applies to assessments for the 1998‑99 income year and later income years. (a) it had applied to your assessment for each income year before the 1998‑99 income year for which Division 16 of Part III of the Income Tax Assessment Act 1936 applied in relation to your income; and (b) you had carried on a primary production business during each income year before the 1998‑99 income year when you carried on a business of primary production; and (c) for each income year before the 1998‑99 income year you had a basic taxable income equal to your taxable income for the income year for the purposes of Division 16 of Part III of the Income Tax Assessment Act 1936. > Note: Section 149A of the Income Tax Assessment Act 1936 identifies what your taxable income for an income year is for the purposes of Division 16 of Part III of that Act. Division 392 of the Income Tax Assessment Act 1997 does not apply to your assessment for the 1998‑99 income year or a later income year if you made an election under section 158A (Election that Division not apply) of the Income Tax Assessment Act 1936 relating to an income year before the 1998‑99 income year. 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 A reference in Division 393 of the Income Tax Assessment Act 1997 to a deduction under section 393‑5 of that Act for making a farm management deposit is taken to include a reference to a deduction under section 393‑10 in Schedule 2G to the Income Tax Assessment Act 1936, as in force just before the commencement of this section, if the deposit was made before the 2010‑11 income year. #### 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 (b) the deposit was made with an FMD provider as a result of a request to which section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, applied; the unrecouped FMD deduction in respect of the deposit at that time is equal to the amount of the unrecouped deduction (within the meaning of the former subsection 159GA(3) of the Income Tax Assessment Act 1936) in respect of the deposit immediately before it ceased to be a deposit under the Loan (Income Equalization Deposits) Act 1976. > Note: This means that the unrecouped deduction relating to the deposit under the Loan (Income Equalization Deposits) Act 1976 continues to apply (by becoming an unrecouped FMD deduction) when the deposit is transferred to an FMD provider as a farm management deposit. The Loan (Income Equalization Deposits) Act 1976 was repealed on 22 February 2005. If a beneficiary of a trust was covered by paragraph (c) of the definition of primary producer in section 393‑25 in Schedule 2G to the Income Tax Assessment Act 1936 in the 2009‑10 income year, treat subsection 393‑25(3) of the Income Tax Assessment Act 1997 as having applied to the beneficiary for the purpose of determining the maximum number of choices that the trustee may make under subsection 393‑27(2) of that Act for the 2010‑11 income year. (a) a farm management deposit of an owner was unclaimed moneys for the purposes of section 69 of the Banking Act 1959; and (2) For the purpose of subsection 393‑10(1) of the Income Tax Assessment Act, treat the repaid unclaimed moneys as a repayment of the deposit of the owner. (3) To avoid doubt, the payment of unclaimed moneys to the Commonwealth under section 69 of the Banking Act 1959 is not a repayment of the deposit of the owner for the purposes of Division 393 of the Income Tax Assessment Act 1997. 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 #### 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 If a farm management deposit was made with an FMD provider as a result of a request under section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, then: (a) subsections 393‑40(1) to (4) of the Income Tax Assessment Act 1997 apply as if the day the deposit was made was the day on which the deposit was originally made under the Loan (Income Equalization Deposits) Act 1976; and (1) A copyright collecting society to which section 51‑43 of the Income Tax Assessment Act 1997 applies, may elect that, from 1 July 2004, the section apply to all ordinary income, and statutory income, collected or derived by the society on or after 1 July 2004. Division 420 of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division. Subdivision 615‑C of the Income Tax Assessment Act 1997 applies to you with the modifications set out in this Subdivision if you chose to obtain a roll‑over involving \*shares or units that: (b) were your trading stock, or revenue assets, at the time immediately before that disposal, redemption or cancellation. (1) Disregard subparagraph 615‑45(a)(ii), and paragraph 615‑45(b), of the Income Tax Assessment Act 1997 if the roll‑over relates to \*shares that were disposed of, redeemed or cancelled. (2) For each of the \*shares in the interposed company that you acquired in return for those of your shares or units in the original entity that were your \*trading stock at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  (2) For the purpose of calculating any profit or loss on a future disposal, cessation of ownership, or other realisation of a \*share in the interposed company that you acquired in return for those of your shares or units in the original entity that were \*revenue assets at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  Subdivision 620‑A of the Income Tax Assessment Act 1997 applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. (1) Part 3‑90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Act (No. 1) 2002 and amended by: (2) Section 713‑50 of the Income Tax Assessment Act 1997 (about factors to consider in determining destination of distribution by non‑fixed trust) applies for the purposes of this Part in the same way as it applies for the purposes of Part 3‑90 of that Act. ### Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly‑owned subsidiary of the entity (the future head company) that became the head company of the group; or (ii) at some time during that period, the entity was a wholly‑owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (ii) it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (1) If a group is a transitional group, its head company may, subject to subsection (3), choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (3) If the choice is to be made after the end of the period mentioned in paragraph (2)(a) and before the end of the day mentioned in paragraph (2)(b), it cannot be made unless each entity in relation to which the conditions in subsection (5) are satisfied has agreed to it being made. (a) the entity (the leaving entity) ceased to be a subsidiary member of the group before the choice was made (in a subsection (3) case) or before the revocation took place (in a subsection (4) case); and (b) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; and (c) the asset had become that of the head company because that section applied when a chosen transitional entity (whether or not the same entity as the leaving entity) became a subsidiary member. Section 716‑855 applies for the purposes of this Division in the same way as that section applies for the purposes of Part 3‑90 of the Income Tax Assessment Act 1997. is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705‑B of that Act and with this Division. 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity Section 701‑10 (cost to head company of assets of joining entity) and subsection 701‑35(4) (setting value of trading stock at tax‑neutral amount) of the Income Tax Assessment Act 1997 do not apply to the assets of a chosen transitional entity. > Note: The fact that the head company inherits the entity’s history under section 701‑5 of that Act when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time. #### 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities (2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non‑chosen subsidiary) is worked out in a special way. (b) for each sub‑group (see subsection (6)) that exists in relation to the non‑chosen subsidiary—the sub‑group’s notional allocable cost amount (see subsection(5)) for the non‑chosen subsidiary. (4) The head company adjusted allocable amount for the non‑chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if; (b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of head company’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub‑group in relation to the non‑chosen subsidiary. (5) For each sub‑group that exists in relation to the non‑chosen subsidiary, there is a sub‑group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non‑chosen subsidiary if: (a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non‑chosen subsidiary and the entities comprising the sub‑group; and (c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub‑group membership interests (see subsection (6)) in relation to the sub‑group, and any such entity held those membership interests during the period when it actually held them; and (d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of chosen transitional entity’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub‑group. (6) If a chosen transitional entity holds membership interests in a non‑chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non‑chosen subsidiary: (a) the chosen transitional entity and each interposed non‑chosen subsidiary comprise a sub‑group in relation to the non‑chosen subsidiary (unless the non‑chosen subsidiary is included in a sub‑group in relation to another non‑chosen subsidiary); and (i) the membership interests that the chosen transitional entity holds directly in the non‑chosen subsidiary or in any of the interposed non‑chosen subsidiaries; (ii) the membership interests that each interposed non‑chosen subsidiary holds directly in the non‑chosen subsidiary or in any of the other interposed non‑chosen subsidiaries. #### 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities If any provision of the Income Tax Assessment Act 1997 would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply. > Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred. (1) This section has effect for the purposes of applying section 705‑70 (step 2 of allocable cost amount) of the Income Tax Assessment Act 1997 in relation to a transitional entity. (2) In spite of subsection 705‑70(1A) of that Act, if the amount of an accounting liability of the transitional entity would be different when it becomes an accounting liability of the transitional group, that difference is not taken into account in working out the amount of the liability. #### 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different (a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset (the roll‑over asset) for which there was: (ii) roll‑over relief under section 40‑340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and (i) became an asset of the head company when the transitional group came into existence because subsection 701‑1(1) (the single entity rule) of that Act applies; or differs at that time from what it would have been if the act, transaction or event that gave rise to the CGT event had not occurred in relation to the roll‑over asset; then the provisions mentioned in subsection (2) apply as if the act, transaction or event had not occurred in relation to the roll‑over asset. (a) the act, transaction or event mentioned in subsection (1) happened before a demerger and in connection with the demerger; and (b) before the transitional group came into existence, at least one of the following entities ceased to be a member of the demerger group because of the demerger: (i) the originating company in relation to the roll‑over, or the transferor in relation to the roll‑over relief, was a foreign resident; and (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as a transitional foreign‑held subsidiary of the group. #### 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets (1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied. (2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset. (a) the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and (b) former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset. (4) The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group. (6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses. #### 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets (b) just before the transitional group came into existence, the entity that became the head company held a pre‑CGT asset; and (d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre‑CGT asset and is held by the head company only because the entity is taken by subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company. (2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence. #### 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity (1) This section provides for an addition to the step 1 amount for working out under section 711‑20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity) that ceases to be a subsidiary member of the transitional group at a time (the leaving time), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701‑1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount for paragraph</span><span> </span><span>(2)(c)</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">If, because of the circumstances described in paragraphs</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(a) and (b):</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">The amount is:</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:180.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following provisions applied to the entity:</span></p><p class="Tablea"><span>(a) former section</span><span> </span><span>61A of the </span><span style="font-style:italic">Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(b) former Subdivision</span><span> </span><span>57</span><span>‑</span><span>I in Schedule</span><span> </span><span>2D to the</span><span style="font-style:italic"> Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(c) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(4) of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td><td style="width:148.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the amount treated as being the cost of the asset under that provision; and</span></p><p class="Tablea"><span>(b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>2</span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following subsections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span><span> applied to the entity:</span></p><p class="Tablea"><span>(a) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(5);</span></p><p class="Tablea"><span>(b) 58</span><span>‑</span><span>70(3)</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The amount treated as being the cost, or the first element of the cost, of the asset under that subsection</span></p></td></tr></tbody></table> ``` (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997, as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="4" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amounts and provisions for different dates of acquisition</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Date of the acquisition</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Amount</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Provision of Division</span><span style="font-weight:bold"> </span><span style="font-weight:bold">58 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> applying to the acquisition and the working out of the amount</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:76.7pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>160</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>220</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>After 30</span><span> </span><span>June 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>First element of the cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subsection</span><span> </span><span>58</span><span>‑</span><span>70(5)</span></p></td></tr></tbody></table> ``` > Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. > Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and ### Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: #### 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70‑45 to 70‑70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420‑51 to 420‑58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (a) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority‑owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority‑owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority‑owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority‑owned entity became a subsidiary member of the group, there was roll‑over relief under section 40‑340 of the Income Tax Assessment Act 1997. (a) while the asset is, because subsection 701‑1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, its tax cost setting amount is taken to be equal to the continuing majority‑owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711‑30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997. (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset becomes that of an entity (a new asset holder) other than the head company because subsection 701‑1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder) acquiring some or all of the membership interests in the new asset holder; and (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset is acquired by another entity (a new asset holder) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll‑over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value asset just before the acquisition; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 #### 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 (b) members of the consolidated group or the MEC group mentioned in subsection 104‑500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701‑1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701‑1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (3) If this section applies, neither subsection 104‑500(4) nor subsection 104‑500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year. ### Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C‑B); and (b) modifies certain rules in Part 3‑90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C‑C). > Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719‑2 and 719‑10 of this Act). 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership #### 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(ii) of that Act (see subsection 719‑2(3) of this Act). (b) a trust (a non‑resident trust) that does not meet the requirements in any item of the table in section 703‑25 of the Income Tax Assessment Act 1997. (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non‑resident company or a non‑resident trust; or Test entity must be a subsidiary member on assumption that non‑resident companies and non‑resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non‑resident company or non‑resident trust were a subsidiary member of the group. (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv). #### 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(iii) of that Act (see subsection 719‑2(3) of this Act). (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C‑10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3). If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C‑10 are met; and (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (ii) an entity that is a transitional foreign‑held indirect subsidiary of the group because of another application of this paragraph; Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign‑held indirect subsidiary would need to have satisfied the set of requirements in either section 701C‑10 or 701C‑15 (1) This Subdivision applies if an entity (the transitional foreign‑held joining entity) that is a transitional foreign‑held subsidiary or a transitional foreign‑held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time) the group comes into existence. (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign‑held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign‑held indirect subsidiary that becomes a subsidiary member at that time takes account of this. (a) section 701‑10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); apply, for the purposes of setting the tax cost of an asset of the transitional foreign‑held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign‑held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. > Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign‑held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign‑held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign‑held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign‑held subsidiary and the other entity. > Note 2: If the transitional foreign‑held joining entity is a transitional foreign‑held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705‑A of the Income Tax Assessment Act 1997, in its application in accordance with Subdivision 705‑B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company. Subsection 701‑35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax‑neutral amount) does not apply to the assets of the transitional foreign‑held joining entity if it is a transitional foreign‑held subsidiary. Section 701‑15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: (a) this section applies to each membership interest in the transitional foreign‑held subsidiary that is held by an entity (an eligible non‑resident) of a kind mentioned in subparagraph 701C‑20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign‑held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701‑1(2) of the Income Tax Assessment Act 1997 applies to the eligible non‑resident in the same way as it applies to the head company. Section 711‑5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: > Note: If the leaving entity is a transitional foreign‑held subsidiary (within the meaning of section 701C‑20 of the Income Tax (Transitional Provisions) Act 1997), this Division will, in accordance with subsection 701‑15(4) of this Act (see section 701C‑40 of the first‑mentioned Act), apply to membership interests that an eligible non‑resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity. (1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707‑C of the Income Tax Assessment Act 1997. (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period. (1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if: (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (d) the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997. (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: (1) The head company of a consolidated group may make a choice in the approved form to apply section 701D‑10 to another entity. (2) However, the head company cannot make that choice if subsection 701D‑10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (a) an asset of the head company because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701‑55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40‑77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40‑77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40‑285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount. (b) after the asset became an asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). > Note: The final entity will be different from the head company if an entity (the leaving entity) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40‑285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. > Note: The final entity will be entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701‑5 (the entry history rule) of that Act and perhaps also section 701‑40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity) became a subsidiary member of the group; and It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). > Note: In some cases, section 705‑47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40‑285(3) of this Act. If: (b) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and subsection 40‑285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701‑10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997. > Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997. (1) For the purposes of Part 3‑90 of the Income Tax Assessment Act 1997, this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960‑G of that Act whether the interest or right is a membership interest of the entity in the other entity. > Note: Under Subdivision 960‑G of the Income Tax Assessment Act 1997, a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001) apply to transactions in relation to the interest or right at the relevant time. Despite the amendments of section 703‑35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) If an entity (the joining entity) to which section 40‑75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time), this Subdivision applies in relation to: (ii) became assets of the head company of the group at the joining time because of section 701‑1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure. (1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). (2) If the joining entity could not deduct an amount under Subdivision 40‑B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701‑55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40‑35, 40‑37, 40‑40 or 40‑43 treated the joining entity as holding a notional asset. > Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705‑30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. (a) deductions under former Subdivision 330‑A, 330‑C or 330‑H of the Income Tax Assessment Act 1997, or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated an entity as holding because of the expenditure. (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); > Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40‑75(4) of this Act, but may have been reset since under Subdivision 40‑B of the Income Tax Assessment Act 1997. > Note 2: The effective life of a notional asset is specified by whichever one of sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act is relevant to the notional asset. (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (9) Section 705‑55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705‑45 of that Act. > Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705‑40 of the Income Tax Assessment Act 1997. (a) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701‑5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. > Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705‑305(3). (ii) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707‑A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member. 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value #### 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707‑320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor) other than the real loss‑maker mentioned in subsection 707‑315(1) of that Act for the bundle; and (b) both the real loss‑maker and the value donor became members of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (ca) neither the real loss‑maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (ii) a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (ii) section 713‑540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (2) It must have been possible for the real loss‑maker to have transferred the loss to the value donor under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss‑maker at the initial transfer time the amount worked out using the formula:  > Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707‑327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss‑maker to the transferee. > total of real loss‑maker’s non‑foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss‑makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) included in a bundle of losses: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. #### 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value (1) This section affects the calculation of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707‑325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936, in the bundle). > Note: This section does not affect the calculation of the real loss‑maker’s modified market value for other purposes (such as the real loss‑maker being a value donor for the purposes of another application of section 707‑325 of this Act). (3) One condition is that the event was an injection of capital directly into the real loss‑maker by the value donor mentioned in section 707‑325 of this Act. (c) that would have caused subsection 707‑325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss‑maker’s modified market value (even if no other events described in subsection 707‑325(4) of that Act had occurred), apart from this section. (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss‑maker (whether or not the event also involved either the value donor or the real loss‑maker); or (1) This section has effect for the purposes of working out under Subdivision 707‑C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707‑325, as if there were added to the modified market value of the real loss‑maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (c) the loss is not a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707‑A of that Act at the initial transfer time had the company: > Note: This section has effect even if the amount added to the real loss‑maker’s modified market value under section 707‑325 is nil because the value donor’s modified market value is nil. (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707‑325, as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (4) If the transferee mentioned in subsection 707‑325(1) chooses, sections 707‑310, 707‑335 (except paragraph 707‑335(2)(a)) and 707‑340 of the Income Tax Assessment Act 1997 (and subsections 707‑315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: > Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707‑325(1)(d) and (e) and subsection 707‑325(2) in an application of section 707‑325 separate from the application of that section mentioned in paragraph (1)(a) of this section. > Note: This means that a loss that provided a basis for section 707‑325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. (b) in connection with the requirement that it must have been possible for a company (the notional transferor) to transfer to another company (the notional transferee) for an income year a loss under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997. (b) ends immediately after the initial transfer time mentioned in subsection 707‑320(1) of the Income Tax Assessment Act 1997. > Note: For the purposes of identifying the trial year using the definition in section 707‑120 of the Income Tax Assessment Act 1997, the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time. (1) Subsection (3) of this section affects the calculation, under section 707‑325 of the Income Tax Assessment Act 1997 and section 707‑325 of this Act, of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (the formation time) the group became a consolidated group; and (b) the provisions described in subsection 707‑327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707‑327(1)(b) and (c) of this Act as if the bundle included the loss; and (d) subsection 707‑325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707‑325(1) of this Act chooses that this section apply in relation to the real loss‑maker. (2) Section 707‑325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. (3) Disregard for the purposes of subsection 707‑325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707‑325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or > Note: Disregarding such an event could have a direct or indirect effect on the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss‑maker’s modified market value calculated under section 707‑325 of the Income Tax Assessment Act 1997, if the real loss‑maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707‑325 of this Act to add an amount to the real loss‑maker’s modified market value for those purposes. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) that: (b) was transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from an entity other than the real loss‑maker. (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997. Disregard an event that is described in subsection 707‑325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707‑325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004. (1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss‑maker) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time) the transferee became the head company of a consolidated group; and (ii) the conditions in one or more of paragraphs 165‑15(1)(a), (b) and (c) did not exist in relation to the real loss‑maker; and (da) the real loss‑maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non‑transferred losses) of the same sort that the transferee made without a transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non‑transferred losses). (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. <table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Limit on utilising the losses</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For this income year:</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the losses that the transferee may utilise cannot exceed:</span></p></td></tr></thead><tbody><tr><td style="width:20.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:120.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The first income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span style="font-size:8pt; vertical-align:2pt">1</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The second income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) </span><span style="font-size:8pt; vertical-align:2pt">2</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the amount of the losses utilised for the income year mentioned in item</span><span> </span><span>1</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The third income year ending after the initial transfer time, or a later income year</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time</span></p></td></tr></tbody></table> ``` (4) Subdivision 707‑C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707‑A of that Act. > Note: This has 2 effects. First, Subdivision 707‑C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707‑A of that Act). (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). (7) This section does not limit the transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company. In working out when a choice may be made under subsection 707‑325(5), 707‑327(5), 707‑328A(4) or 707‑350(5), ignore losses to which section 713‑535 of the Income Tax Assessment Act 1997 applies. > Note: That section deals with losses transferred under Subdivision 707‑A of that Act from certain wholly‑owned subsidiaries of life insurance companies that are members of a consolidated group. Section 707‑405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act. (1) This section reduces the adjustable value of a notional asset that section 40‑35, 40‑37, 40‑38, 40‑40 or 40‑43 treats the head company of a consolidated group as holding, if: (b) that section treats the leaving entity as holding a notional asset because of section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997. > Note: Section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time. The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences. (1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event) happening involving an entity (the originating entity) and another entity (the recipient entity) if: (a) the event occurs in connection with a life insurance company (the member life insurance company) becoming a member of a consolidated group; and (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest) in a company or in another trust. (a) a life insurance company transfers an asset (also the original asset) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320‑200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset) to its segregated exempt assets where, apart from this Subdivision, section 320‑255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event) is made in connection with the life insurance company (also the member life insurance company) becoming a member of a consolidated group. (1) This Subdivision applies only if the originating entity (for a section 713‑505 case) or the life insurance company (for a section 713‑510 case) chooses that it apply. (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713‑510 of the Income Tax Assessment Act 1997; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713‑510 of the Income Tax Assessment Act 1997; and (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs. This Act, and the Income Tax Assessment Act 1997, apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group. (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain) that the originating entity would have made as a result of the deferral event is disregarded; and (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount) under paragraph 320‑15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (1) This section operates if, after the deferral event happens, another event (the new event) happens where the new event is: (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (i) the original asset being transferred to or from the company’s virtual PST under section 320‑180, 320‑185 or 320‑195 of the Income Tax Assessment Act 1997; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320‑235, 320‑240 or 320‑250 of that Act; or (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. > Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713‑505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (1) For a section 713‑505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713‑535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: (a) an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group at a time (the leaving time); and (b) but for the cessation of membership and section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision. Sections 716‑340 and 716‑345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. <table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:345.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Extended operation of sections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 1</span><br><span style="font-weight:bold">Sections</span><span style="font-weight:bold"> </span><span style="font-weight:bold">716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">340 and 716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">345 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> operate in relation to:</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 2</span><br><span style="font-weight:bold">In the same way as they operate in relation to:</span></p></td></tr></thead><tbody><tr><td style="width:5.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:161.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>46</span><span>‑</span><span>90 of that Act</span></p></td><td style="width:156.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>40</span><span>‑</span><span>455 of that Act</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software pool created under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure allocated to a software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Software, expenditure on which was in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>In</span><span>‑</span><span>house software, expenditure on the development of which is allocated to a software development pool</span></p></td></tr></tbody></table> ``` (1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: Section 703‑30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004. (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time) a wholly‑owned subsidiary of the entity that became the head company of the group (the head entity), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier‑1 company of the group at the formation time. Despite the amendment of section 719‑30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) Section 719‑160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719‑160(3) of the Income Tax Assessment Act 1997. (3) However, that effect of section 719‑160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division. (2) Paragraphs 701‑1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier‑1 company at the time the MEC group came into existence. (a) the entity and one or more other entities were members of a potential MEC group as eligible tier‑1 companies, throughout the period: (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier‑1 company, at the time the transitional group came into existence. To avoid doubt, sections 707‑325 and 707‑327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719‑305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707‑A of that Act. Subsection 719‑325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006. (1) A reference in an agreement to item 25 of the table in subsection 721‑10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: (1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: Division 725 applies to a scheme entered into on or after 1 July 2002. It also applies to a scheme entered into on or after 27 June 2002, but only if: ### Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (1) Division 727, as inserted by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 and amended by the New Business Tax System (Consolidation and Other Measures) Act 2003, applies to a scheme entered into on or after 1 July 2002. (b) a presumed indirect value shift that happens under the scheme and affects a realisation event that happens on or after 1 July 2002. (a) the economic benefits taken into account in determining that the scheme has resulted in that indirect value shift or presumed indirect value shift include economic benefits provided by: > Note: In that case, the consequences of the trigger event are worked out under Division 138 or 139 of the Income Tax Assessment Act 1997: see items 13 and 14 of Schedule 15 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002. (1) An indirect value shift does not have consequences under Division 727 of the Income Tax Assessment Act 1997 if, to the extent of at least 95% of their total market value, the greater benefits consist entirely of: (a) a right to have services that are covered by section 727‑240 of that Act provided directly by the losing entity to the gaining entity; or (d) if the losing entity’s 2002‑2003 income year ends before 30 June 2003—the start of the losing entity’s 2004‑2005 income year. (2) For the purposes of section 727‑850 (about a presumed indirect value shift affecting a realisation event) of the Income Tax Assessment Act 1997, subsection (1) of this section applies to the presumed indirect value shift: #### 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (2) Paragraph 727‑470(2)(a) of the Income Tax Assessment Act 1997 (as in force immediately before the commencement of this section) continues to have effect in relation to the indirect value shift as if the repeals and amendments made by Schedule 1, Parts 1 and 2 of Schedule 3 and Schedule 8 to the Tax Laws Amendment (Small Business) Act 2007 had not been made. ## Division 320 Life insurance companies ## Operative provisions Operative provisions (a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and (2) Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001 (the new Act) applies to the plant on this basis: (a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant’s opening adjustable value; and (b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and (c) if you excluded an amount from your assessable income under section 42‑290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999—the cost of the plant, and its opening adjustable value, are reduced by that amount; and (d) if subparagraph (1)(b)(ii) applies to you—you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi‑owner of the plant under the former Act continue. (3) If you were using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis: (a) for the diminishing value method—replace the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate you were using; and (i) replace the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate you were using; and (ii) increase the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note 1: Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced. > Note 2: Small business entities can choose to work out the decline in value of their depreciating assets under Division 328. (a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or (3) If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40‑70(1) or 40‑75(1) of the new Act that includes the plant’s effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and (2) For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets. (3) For a case where the plant is merged into another depreciating asset, section 40‑125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it. (b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and (a) you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and (b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU’s opening adjustable value. (1) Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001. (2) For a unit of software for which you were deducting amounts under Subdivision 46‑B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis: (d) you must use the same effective life you were using under Subdivision 46‑B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001. (1) This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day. (b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and (c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and (1) This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001. > Note: Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8). (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330‑80 of the former Act for your income year ending on 30 June 2001; and (c) in applying the formula in section 40‑75 of the new Act for the income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The remaining effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these: (i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and (ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (7) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and (b) the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of expenditure incurred in carrying on eligible quarrying operations—the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (i) you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day) after 30 June 2001; or (ii) the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day) after 30 June 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which the start day occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year. there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (1) This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330‑H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and (c) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (i) any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset); (i) any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (4) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (4) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (b) the expenditure would have been transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330‑H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for your income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (1) Despite subsections 40‑35(5), 40‑38(5) and 40‑40(4), there is no additional decline in the value of the notional asset referred to in those subsections if: (a) apart from this section, subsection 40‑35(5), 40‑38(5) or 40‑40(4) would apply because the real asset referred to in that subsection is disposed of; and (a) at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373‑35 of the former Act; and (b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day. (a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and (1) Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time). (2) Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time. (a) you have deducted or can deduct an amount under Subdivision 387‑G of the former Act for an amount (the qualifying amount) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and (b) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and (1) This section applies to you if you have deducted or can deduct an amount under Subdivision 400‑A of the former Act for an amount (the qualifying amount) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400‑A of the former Act. (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and (c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400‑15(3) of the former Act; and (1) Units of plant that you had allocated to a pool under Subdivision 42‑L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act. (a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and (c) in applying the formula in section 40‑70 of the new Act for your income year in which 1 July 2001 occurs—it has a base value equal to that opening adjustable value; and (d) you replace the component in the formula in subsection 40‑70(1) of the new Act that includes an asset’s effective life with the pool percentage you were using for the pool; and (e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40‑115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and (f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset. (3) An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item). > Note 1: You work out the decline in value of an item removed under this subsection under Subdivision 40‑B of the new Act, using the cost for it worked out under section 40‑205 of the new Act. (b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset. (2) The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year) in this way: (a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and (b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section. (a) for a unit of plant (including IRUs and expenditure on software that is not pooled)—its undeducted cost at the end of 30 June 2001; or (b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence—the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or (c) for transport capital expenditure—the entity’s amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or (d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (e) for expenditure on evaluating the impact on the environment of a project—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (f) for assets that were pooled under Subdivision 42‑M or 42‑L of the former Act—the closing balance of the pool at the end of 30 June 2001. (4) The asset’s base value for applying the formula in section 40‑70 of the new Act for the diminishing value method is that opening adjustable value. (5) The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an item of plant for which you were using the prime cost method—using the rules in section 40‑10 of this Act; and (c) for a unit of software for which the entity was deducting amounts under Subdivision 46‑B of the former Act—using the rules in subsection 40‑25(2) of this Act; and (f) for an amount of expenditure on evaluating the impact on the environment of a project—using the rules in section 40‑55 of this Act. (6) The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an amount of unrecouped expenditure under Division 330 of the former Act—using the rules in section 40‑35 of this Act; and (b) for an amount of transport capital expenditure under Division 330 of the former Act—using the rules in section 40‑40 of this Act; and (7) The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act. (a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑C of the former Act; or (b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑H of the former Act; or (c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387‑B of the former Act; or (d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; or (e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365. (9) The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001. (10) You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount). (11) You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount. (1) Subsections 40‑65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened: (b) you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act. (a) paragraph 40‑65(6)(a) of the Income Tax Assessment Act 1997 included both events set out in subsection (1) of this section; and (b) subsections 40‑65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events. (1) A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936. (2) An amount you have deducted or can deduct for a water facility under Subdivision 387‑B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40‑F of the new Act. (3) A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936. (a) you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40‑115 (about splitting a depreciating asset) or 40‑125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and (b) it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40‑72 of that Act; (2) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if: (c) it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40‑72 of that Act. (3) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset) before 10 May 2006 if: (b) the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and (d) it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40‑72 of that Act. (a) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you: (b) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001. (2) If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act. (3) Otherwise, Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section. (a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or (b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or (ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life. (1) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001. > Note: If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40\. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997. (1A) Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001. (1B) Subsection (1) applies to a mining, quarrying or prospecting right (the new right) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if: (i) the other company is a member of the same wholly‑owned group as the original holder and was a member of that group just before that day; and (ii) the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer. (1D) Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if: (b) the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001. (a) you acquired, under an interest realignment arrangement, an interest (a new interest) in a mining, quarrying or prospecting right; and (b) the interest was acquired in exchange for one or more other interests (old interests) in other mining, quarrying or prospecting rights; and Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001. (a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or (b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership; the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act. (3) An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that: (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act. (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act. (6) Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243. (7) An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if: (a) you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and (8) The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section. (c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act. (2) Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001. A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act. if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011. (2) The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011. (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset for an income year is the amount worked out under section 40‑130 if: (a) the income year is the year in which you start to use the asset, or have it installed ready for use, for a taxable purpose; and (b) subsection (2) (about businesses with turnover less than $500 million) applies to you for the year and for the income year in which you started to hold the asset (if that was an earlier year); and > Note 1: An effect of paragraph (1)(a) is that this Subdivision only applies to one income year per asset. See also subsection 40‑135(1). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $500 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. Exception—assets for which the decline in value is worked out under section 40‑82 or Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (3) However, this section does not apply to a depreciating asset for an income year if you work out the decline in value of the asset for the income year under any of the following: (1) For the purposes of paragraph 40‑120(1)(c) and section 328‑182, you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you: > Note: Section 328‑182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997. (i) entering into a contract under which you hold the post‑12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑12 March 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post‑12 March 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (8) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (9) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (10) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (1) For the purposes of section 40‑120, the decline in value for the income year in which paragraph 40‑120(1)(a) is satisfied (the current year) is: > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 12 March 2020 to 30 June 2020 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2020 to 30 June 2021. (a) 50% of the asset’s cost as at the end of the current year, disregarding any amount included in the second element of the asset’s cost after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997, assuming its cost were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (3) However, the amount worked out under subsection (2) for an income year cannot be more than the amount that is the asset’s cost for the year. (a) 50% of the sum of the asset’s opening adjustable value for the current year and any amount included in the second element of its cost for that year, disregarding any amount included in that second element after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997 assuming: (ii) for the prime cost method—the component “Asset’s \*cost” in the formula in subsection 40‑75(1) of that Act (as adjusted under that section) were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (b) for the prime cost method—the sum of its opening adjustable value for the income year and any amount included in the second element of its cost for that year. (1) The decline in value of a depreciating asset is not worked out under this Subdivision for an income year if this Subdivision already applied in working out the decline in value of the asset for an income year. (2) For an income year later than the year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (3) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (4) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) You may choose that the decline in value of a particular depreciating asset for an income year, and subsequent income years, is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the first income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. If this Subdivision applies to work out the decline in value of a depreciating asset you hold for an income year, no other provision of this Act or the Income Tax Assessment Act 1997 applies to work out that decline in value. (1) For the purposes of this Subdivision, you are covered by this section for a depreciating asset if, on or before 30 June 2023: (2) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (3) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or Exception—assets for which the decline in value is worked out under Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (a) the asset is allocated to a low‑value pool, or expenditure on the asset is allocated to a software development pool (see Subdivision 40‑E of the Income Tax Assessment Act 1997); or (b) you or another taxpayer has deducted or can deduct amounts for the asset under Subdivision 40‑F of the Income Tax Assessment Act 1997 (about primary production depreciating assets). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $5 billion; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this section. (ii) if the 2019‑20 income year ends on or before 6 October 2020—the sum of your ordinary income (if any) and statutory income (if any) for the 2019‑20 income year; and (c) the sum of the amounts worked out under subsection (3) for the 2016‑17, 2017‑18 and 2018‑19 income years exceeds $100 million. (b) next, work out the cost of each of those assets (including any amounts included in the second element of the asset’s cost at a time that is in the income year); (4) For the purposes of subsection (3), disregard an asset if, at the time you first used the asset, or had it installed ready for use, for a taxable purpose: (a) it was not reasonable to conclude that you would use the asset principally in Australia for the principal purpose of carrying on a business; or (5) For the purposes of paragraph (3)(b), to work out the cost of a depreciating asset that is capital works (see section 43‑20 of the Income Tax Assessment Act 1997): (a) disregard section 40‑45 of that Act and work out the cost of the capital works using Subdivision 40‑C of that Act; and (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under subsection (3) if: (a) where section 40‑155 covers you for the current year (regardless whether section 40‑157 also covers you for the current year)—an exclusion applies to you and the asset for the current year under section 40‑165 (about exclusions for businesses with turnover of $50 million or more); or (ii) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s start time occurs in the current year—the asset’s cost as at the end of the current year, disregarding any amount included in the asset’s cost after 30 June 2023; or (b) if the asset’s start time occurred in an earlier year—the sum of its opening adjustable value for the current year and any amount included in the second element of its cost for the current year, disregarding any amount included in the asset’s cost after 30 June 2023. > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 6 October 2020 to 30 June 2021 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2021 to 30 June 2022. (a) where paragraph 40‑160(2)(a) applies—section 40‑155 would not cover you for the income year if the reference in that section to $5 billion were instead a reference to $50 million; and (i) entering into a contract under which you hold the post‑6 October 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑6 October 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of satisfying paragraph 40‑160(1)(a) for the post‑6 October 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you already satisfied paragraph 40‑160(1)(a) of this Act for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (9) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (1) For the purposes of subsections 40‑160(2) and 40‑170(1A), an exclusion applies to you and an asset for an income year if any of the exclusions in this section applies in relation to the asset. (4) This exclusion applies in relation to the asset if the asset is available for use, at any time in the income year, by any of the following: (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under this section if: (ii) you started to use the asset, or have it installed ready for use, for a taxable purpose in an earlier income year; and (b) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under section 40‑82 of the Income Tax Assessment Act 1997—the amount worked out under subsection (3); or (b) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under Subdivision 40‑BA of this Act—the amount worked out under subsection (4); or Assets affected by section 40‑82 of the Income Tax Assessment Act 1997 (about assets costing less than $150,000, medium sized businesses) (a) the amount that would be the asset’s decline in value for the year under section 40‑82 of the Income Tax Assessment Act 1997, assuming the reference in subparagraph 40‑82(3A)(b)(ii) of that Act to 31 December 2020 were instead a reference to the 2020 budget time; and (a) the amount that would be worked out under paragraph 40‑130(2)(a) or (4)(a) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(a) and (4)(a) to 30 June 2021 were instead references to the 2020 budget time; and (c) the amount that would be worked out under paragraph 40‑130(2)(b) or (4)(b) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(b) and (4)(b) to “the amount worked out under paragraph (a)” were instead references to “the amounts worked out under paragraphs 40‑170(4)(a) and (b)”. (a) the amount that would be the asset’s decline in value for the year under Division 40 of the Income Tax Assessment Act 1997, disregarding any amounts included in the eligible second element worked out under section 40‑175 of this Act for the asset for the year; and The amount worked out under this section (the eligible second element) for a depreciating asset for an income year is the sum of any amounts included in the second element of the asset’s cost at a time that is in both of the following periods: (1) For an income year later than a year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (2) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (3) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) This section applies if the decline in value for a depreciating asset for an income year is worked out under this Subdivision, and at a time (the balancing adjustment time) in a later income year: (i) it becomes not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (b) none of the requirements in paragraphs 40‑295(1)(a), (b) or (c) of the Income Tax Assessment Act 1997 are satisfied in relation to the asset. (2) For the purposes of Subdivision 40‑D of the Income Tax Assessment Act 1997 assume that, at the balancing adjustment time, you stop using the asset, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again. (3) For the purposes of section 40‑180 of the Income Tax Assessment Act 1997 assume that the reference in item 3 of the table in subsection 40‑180(2) of that Act to “because you stop using it for any purpose expecting never to use it again” were instead a reference to “because of section 40‑185 of the Income Tax (Transitional Provisions) Act 1997”. (4) If a balancing adjustment event happens to a depreciating asset you hold because of this section, this Subdivision cannot apply to work out the decline in value of the asset for a later income year. (1) You may choose that the decline in value of a particular depreciating asset for an income year is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year. (1) Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40. (a) you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset: (ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and (4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day. (5) The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if: (i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or (ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and  > sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose. (7) Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens: (a) if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b). (i) an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and (ii) the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and (3) The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount. (a) on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and (c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and (ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal; (2) There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal. (3) Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount. If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997. (a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and (b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and: (i) the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, the R&D entity is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—a clawback amount under section 355‑447 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑466 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. (b) section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions. > Note 2: The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and: (i) the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset; (ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, an R&D entity (the partner) that is a partner in the R&D partnership and is entitled to one or more new law deductions for one or more income years for the asset, is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—a clawback amount under section 355‑449 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑468 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s new law deductions mentioned in paragraph (2)(b) of this section. (4) Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event. > Note: Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions. (1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant. (b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and (3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it. (a) there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and (b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act. (2) The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor. (3) The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and <table cellspacing="0" cellpadding="0" style="width:364.2pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:353.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading" style="page-break-inside:avoid"><span>Conditions for small business taxpayers retaining accelerated rates</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Condition</span></p></td></tr></thead><tbody><tr><td style="width:21.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:321.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>The transferee must have been a small business taxpayer for the income year (the </span><span style="font-weight:bold; font-style:italic">start year</span><span>) that includes the time when the entity first used the plant, or first had it installed ready for use.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>2</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>At that time, neither of these applies:</span></p><p class="Tablea"><span>(a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;</span></p><p class="Tablea"><span>(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection</span><span> </span><span>(5).</span></p></td></tr></tbody></table> ``` (4) For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership. (5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement. (a) for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or (i) replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and (ii) increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).  (b) if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11). (c) that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and (d) that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and (e) that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity. (a) for taxable supplies (if any) the entity makes during the year in the course of carrying on a business—the value (as defined by section 9‑75 of the GST Act) of the supplies; and (b) for other supplies the entity makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies. (1) The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for: (a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (c) for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or (d) for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant. (3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115. (4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain. (5) Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee. (i) the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or (a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and (1) A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act. (2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year. For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if: Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act. (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset): and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply. (i) for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or (ii) for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and (c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act. (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and (2) Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act. The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under: (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on: (2) You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act. (3) A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under: (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and (2) Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act. A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act. The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001. If: (d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act; (a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and (a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and (b) the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and (c) paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997. Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years. (1) For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section. (b) the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (b) that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (1) There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea" style="page-break-after:avoid"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a); and</span></p><p class="Tablea" style="page-break-after:avoid"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (b) disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (f) an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division. (4) If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45‑5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest. (5) If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45‑10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest. Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Disregard the use of the following amounts in determining (for the purposes of Subdivision 50‑A of the Income Tax Assessment Act 1997 whether a fund established before 1 July 1997 operates and pursues its purposes in Australia: Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years. (2) However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date. Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if: (b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time. Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years. 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years (1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act. <table cellspacing="0" cellpadding="0" style="margin-left:56.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:258.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Application provisions for specific sections</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-size:9pt; font-weight:bold">Item</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">This section of the </span><span style="font-size:9pt; font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-size:9pt; font-weight:bold"> ...</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">Applies as described in this provision of this Act ...</span></p></td></tr></thead><tbody><tr><td style="width:24.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55(1)</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>95</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>8</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td></tr></tbody></table> ``` (a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and (b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997. > Note: Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year. (b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997; sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997). > Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock. (3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997. (a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and (b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936; > Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal. #### 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997. (1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year. (2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936. (3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year: (a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners; (b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed. > Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year. > Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year. (b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year; the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year. (2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. (3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2). #### 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997. #### 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business (1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. (2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity. > Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997. (1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. (2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value. > Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997. #### 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year. (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. > Note: Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. > Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given). (5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act). (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment. > Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%. (5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%. (6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.  > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section. (b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4). Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age. Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later. Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies. Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3. (4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997. (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%. > Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986. (5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D. > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. (a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and (b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year). (3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and (2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual: (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income. > Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F. > Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997. > Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997. #### 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 (1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012. (2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies. (3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act. (b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009. (2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if: (i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest; (iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or (i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest; (iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009. (2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time. (4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2): (a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and (b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being: (ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and (c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and (d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if: (i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or (ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and (e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and (i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and (ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and (g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest. (a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced: (i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or (ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and (b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5. (2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right. (3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right. (2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. (3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section. Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years. (1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision. > Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision). > Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936). > Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997. (a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936. (1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936. (2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997. > Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997. (3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and (d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; (f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time. > Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and (d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015. (a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or (4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if: (b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset. The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year. (a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and (1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied: (b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and (d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works). (3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936. Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936. (b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006. (2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement. > Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement. Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual: (b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her. 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act (1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee). (2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year: (3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection. #### 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997. Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936). (2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if: (a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; (a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011); (b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986. > Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section. If: (a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and (b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936; Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995. (1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997. (2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997. (3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997. (4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997. > Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one. Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year: (a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and (b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year; the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation. Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset. (b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section); > Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply. (1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if: (a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and (2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value. (4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value. (a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997. (2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less. (1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936: (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. (1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if: (2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by: (a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or (a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or (2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period. Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year: If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997. (1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002. (2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset. (3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required. (i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and (ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and (c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and (f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997). (a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or (1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:  > total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part. (a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or (2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section. (3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1). (1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences. > Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997. (c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets). (4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act. (5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act. Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement. (a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and (2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time. (a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and (ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs. (2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer. (a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and (b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest; (2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event. (3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly. (4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly. <table cellspacing="0" cellpadding="0" style="width:362.55pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:351.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Creating a CGT asset</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">CGT event number</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Applicable amount</span></p></td></tr></thead><tbody><tr><td style="width:50.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D1</span></p></td><td style="width:290.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the incidental costs the originating company incurred that relate to the CGT event</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D2</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the option</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D3</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the right</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>F1</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred on the grant, renewal or extension of the lease</span></p></td></tr></tbody></table> ``` (5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day. A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision. (a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996. (b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. (b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend. (3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities. (1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company. (2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred. (3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company. (1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of: (2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of: (3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note. (1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised. (b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and (ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act. You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and (b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996. (c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and (c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over. (3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. (a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and (c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and (d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act. (3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division. Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years. A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: (1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day. (2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice. (a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and (b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and (a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and (b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and (c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group. (5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004. (6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection. (1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss): (b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions); and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time: (i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or (e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and (f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and (ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred; (2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if: (a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these: (i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset; (ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and (3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act. (a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and (b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section. (5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of: (a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and (b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset. Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. (ii) that could have been deducted, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the deduction had not been limited by the company’s income for that income year; and (ii) that could have been applied, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the application of the loss had not been limited by the company’s capital gains for that income year. 170‑C Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred #### 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years. #### 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). #### Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997. Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997. If: (a) all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (d) that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and (e) the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place. Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years. > introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament. Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day. #### Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting #### 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B. (1) The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day. (2) No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted. #### 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting (1) Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if: (a) the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and (b) none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount. (2) No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount. (1) This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account. (2) For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. > Note 2: If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60. (3) For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)). (4) For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. (5) The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if: (a) during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and (b) the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section. (a) the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and (b) during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components. (7) For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. (8) Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it: (b) the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component. (9) Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component. (10) For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002: (b) lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination; (c) a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination); (e) the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination); (f) the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination). Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period: 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows: (a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and (i) in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and (ii) in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. > Note: A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002. #### 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002: (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:23.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:87.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A franking surplus</span></p></td><td style="width:220.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.009.png" width="175" height="58" alt="Start formula Amount of the class A franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.010.png" width="190" height="56" alt="Start formula Amount of the class B franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.011.png" width="190" height="56" alt="Start formula Amount of the class C franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` #### 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus): (a) a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Original surplus</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:85.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>class A</span></p></td><td style="width:220.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.012.png" width="169" height="38" alt="Start formula Amount of the original class A surplus times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.013.png" width="169" height="38" alt="Start formula Amount of the original class B surplus times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.014.png" width="169" height="38" alt="Start formula Amount of the original class C surplus times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (4) If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit): (a) a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company. (5) The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking deficit into 1997 Act franking debit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Original deficit</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking debit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(4)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:70.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A</span></p></td><td style="width:235.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.015.png" width="164" height="38" alt="Start formula Amount of the original class A deficit times start fraction 39 over 61 end fraction end formula "></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.016.png" width="164" height="38" alt="Start formula Amount of the original class B deficit times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.017.png" width="164" height="38" alt="Start formula Amount of the original class C deficit times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (2) A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if: (c) the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions. (3) The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if: (b) the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and (1) While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit. (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year. (3) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: > Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act. (1) The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account. (a) a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time; (3) If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if: (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity. #### 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If: the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time. (1) Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections. (2) If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year. Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year. Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year. (5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in: that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement. (6) The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (7) The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (2) The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (3) The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (i) are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and (a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and (b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section. (a) whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and (1) This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002. (a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and (3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded. (1) This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002; (2) If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (3) If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (4) If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. (5) If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows: (a) any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and (i) in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and (ii) in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. #### 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF.  #### 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act). (2) If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus): (a) a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF. (4) If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit): (a) a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF. This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period). (1) The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period: (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (1) The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period. (2) The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner. (3) The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5. (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and (d) the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner; the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received. (3) A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time: (1) A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends. (2) However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period. (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (a) the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed: (d) the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and (e) the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return. (2) The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day. (1) The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period. (2) The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made. Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period. (b) on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax); the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed: (c) the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and (d) the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return. (2) The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day. The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period: If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day. If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and If: (a) a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and (b) the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment; In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment. If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment. The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with. If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953. (1) Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period. (a) the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and (b) the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3); the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on: (c) if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or If: Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax. Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division. If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997. (a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day: (3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002. (a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002: > Note: As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date. (b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997. In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003. (1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year. (a) a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of: (i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time; (iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period; (2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if: (b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time: (ii) the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. > Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. > Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. (7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table: <table cellspacing="0" cellpadding="0" style="width:365.35pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount of the franking credit and the exempting debit</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">If:</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the credit and debit is:</span></p></td></tr></thead><tbody><tr><td style="width:22.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The period starts immediately after 7.30</span><span> </span><span>pm by legal time in the Australian Capital Territory on 13</span><span> </span><span>May 1997</span></p></td><td style="width:141.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Both these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was not in surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>All these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was in surplus at the start of the period;</span></p><p class="Tablea"><span>(c) the surplus in the account at the switch time is greater than the surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the franking surplus in the Australian company’s franking account at the switch time; and</span></p><p class="Tablea"><span>(b) the franking surplus in the Australian company’s franking account at the start of the period</span></p></td></tr></tbody></table> ``` (a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and (b) the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period. Subdivision 235‑I of the Income Tax Assessment Act 1997 applies to assets acquired by the trustee of an instalment trust in: (1) Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years. (2) However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time). (3) The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997. Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997. (2) Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in: (1) Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that: (b) is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose. (a) if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007. > Note: To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997. (b) contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option; the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option. (3) For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5). (4) If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is: (a) the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less (b) the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest. (5) If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is: (6) If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil. (1) If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one. (2) If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year. (3) If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year. (a) for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and (b) for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year: Step 1. Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. Step 2. Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3). Step 3. If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year. > Note: Example: Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75): (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred: (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times: (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate. Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008. (a) the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and (b) the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities: (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (i) the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or (ii) the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and (f) none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made: (i) Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event; (ii) a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year. (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (b) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (c) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year #### 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year (a) the requirements set out in paragraphs 275‑610(1)(a), (b) and (c) of the Income Tax Assessment Act 1997 are satisfied in respect of an amount of non‑arm’s length income of a managed investment trust in relation to an income year; and (b) the managed investment trust became a party to the scheme mentioned in paragraph 275‑610(1)(a) of that Act before the day on which the Bill that became the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 was introduced into the House of Representatives; and Division 276 of the Income Tax Assessment Act 1997 as inserted in that Act by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (the amending Act) applies as set out in subitem 1(1) of Schedule 8 to the amending Act. (b) if the trustee of the trust has made a choice for the purposes of paragraph 1(1)(b) of Schedule 8 to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016—the first income year starting on or after 1 July 2015; or (c) if the trustee of the trust has made a choice for the purposes of subparagraph 276‑10(1)(e)(i) of the Income Tax Assessment Act 1997 in respect of the 2016‑17 income year—that income year. (c) the trust is an AMIT for an income year (the discovery year) that is the starting income year or a later income year. (1) This section applies if the trust has an under or over of a character in the discovery year relating to the base year. (b) if, at a time, the trust sent its members distribution statements for an income year that is prior to the starting income year—assume that the trust sent those members AMMA statements for that income year at that time. (3) For the purposes of Division 276 of the Income Tax Assessment Act 1997, treat the under or over mentioned in subsection (1) as an under or over of the AMIT, in the discovery year relating to the base year, of the character mentioned in that subsection. (a) had the under or over mentioned in subsection (1) been discovered before the starting income year, this Act would have operated to produce a particular effect (the pre‑AMIT scheme effect) for the base year in relation to the amount or amounts reflected in the under or over; and 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT #### 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT (b) working out the amount (if any) of the entity’s capital gain under subsection 104‑70(4) of the Income Tax Assessment Act 1997. (3) For the purpose of working out the amount of the non‑assessable part mentioned in paragraph 104‑70(1)(b), treat the following provisions as being in operation at the time the payment was made: (b) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in paragraph (a). (4) Subsection (3) does not apply to the extent (if any) that the entity, in the income tax return that it lodged for the income year in which the payment was made, included the amount of the payment in its assessable income for that income year. (5) For the purposes of section 118‑20 of the Income Tax Assessment Act 1997, treat this section as being in Part 3‑1 of that Act. (2) The Commissioner cannot amend the entity’s assessment for the income year in which the payment was made in a particular way if: (b) the Commissioner could not amend the assessment in that way if the following provisions were in operation at the time the payment was made: (ii) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in subparagraph (i); and Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82‑10F). (2) The object of this section is to apply (with modifications) provisions limiting deductibility in respect of certain contributions made during the period that: (a) Subdivisions AA and AB of Division 3 of Part III of the Income Tax Assessment Act 1936, as in force just before they were repealed by the Superannuation Legislation Amendment (Simplification) Act 2007; (b) any other provision of the Income Tax Assessment Act 1936, or of any instrument made under that Act, to the extent that it relates to the operation of those Subdivisions; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of those Subdivisions. (b) the deduction limit mentioned in section 82AAC for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (c) the deduction limit mentioned in section 82AAT for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (d) Division 290 of the Income Tax Assessment Act 1997 did not apply to contributions made during the income year mentioned in paragraph (a). (2) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of a defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection and subsection (4), the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 5 September 2006; (b) the defined benefit interest mentioned in paragraph (2)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 5 September 2006, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (2)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (4) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of the defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection, the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 12 May 2009; (b) the defined benefit interest mentioned in paragraph (4)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 12 May 2009, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (4)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (1) The object of this section is to apply (with modifications) provisions relating to excess non‑concessional contributions tax in respect of certain contributions made during the period that: (b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision. (ea) in a case where paragraph 292‑95(1)(b) of that Act would have allowed the contribution mentioned in that paragraph to be made at a time within that period—that paragraph allowed the contribution to be made on or before 30 June 2007; and (f) paragraph 292‑95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and (fa) in a case where subsection 292‑100(2), (4), (7) or (8) of that Act would have allowed the contribution mentioned in that subsection to be made at a time within that period—that subsection allowed the contribution to be made on or before 30 June 2007; and (g) paragraph 292‑100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and (h) contributions made during that period that are covered under section 292‑100 of that Act reduce the person’s CGT cap amount for the 2007‑2008 financial year in accordance with subsection 292‑105(2) of that Act (and despite subsection (1) of that section); and (i) if the conditions in subsection (4) are satisfied—the person’s excess non‑concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and (b) the Commissioner gives the person a transitional release authority under subsection 292‑80A(2) in response to the application; and (c) the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292‑80B within 21 days after the date of the release authority; and (d) the superannuation provider pays the person the amount required under section 292‑80C in relation to the transitional release authority. (b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act). (6) The amount to be included in the first person’s amount of non‑concessional contributions under subparagraph (3)(b)(ii) is the sum of: (a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and (b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made. (c) under Division 295 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)), the contribution is included in the assessable income of the superannuation provider in relation to the superannuation plan to which the contribution is made; and (8) For the purposes of paragraph (7)(b), treat the person as an employee of the other entity if the person would be treated as an employee of the other entity under Division 290 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)). (1) A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007. (2) The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292‑80(3)(b)(i), the person would have excess non‑concessional contributions for the financial year mentioned in paragraph 292‑80(3)(a). (4) For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out: The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 21 days after the date of the release authority. (1) A superannuation provider that has been given a transitional release authority in accordance with section 292‑80B must pay to the person within 30 days after receiving the release authority the least of the following amounts: (a) if the person requests the provider in writing to pay a specified amount in relation to the release authority—that amount; (c) the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person in complying superannuation plans. > Note 1: Section 288‑95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection. > Note 2: Section 288‑100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority. > Note 3: For reporting obligations on the superannuation provider in these circumstances, see section 390‑65 in Schedule 1 to the Taxation Administration Act 1953. (2) The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person in complying superannuation plans. (3) Section 307‑125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section. (a) your non‑concessional contributions cap for the 2015‑2016 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsection 292‑85(7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 applies after the commencement of this section as if: (d) subsection 292‑85(6) of that Act as so amended had been applied (taking into account paragraph (c) of this subsection) for the purposes of working out your non‑concessional contributions cap for the 2016‑2017 financial year. (2) For the purposes of working out your non‑concessional contributions caps for the 2017‑2018 financial year and the 2018‑2019 financial year, if: (a) your non‑concessional contributions cap for the 2016‑2017 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsections 292‑85(6) and (7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 apply after the commencement of this section as if the amount worked out under subsection 292‑85(5) of that Act as so amended were $380,000. (3) To avoid doubt, this section does not affect your non‑concessional contributions cap for any financial year that ended before 1 July 2017. The tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your non‑concessional contributions (see section 292‑90 of the Income Tax Assessment Act 1997) for the financial year. (2) Subject to section 294‑55, the amendments of Division 294 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Treasury Laws Amendment (2017 Measures No. 2) Act 2017 apply on and after 1 July 2017. Despite sections 294‑30 and 294‑140 of the Income Tax Assessment Act 1997 (which are about when you have excess transfer balance), you do not have excess transfer balance in your transfer balance account on any day in the period of 6 months beginning on 1 July 2017 if: (a) the only transfer balance credits in the account in that period arose under item 1 of the table in subsection 294‑25(1) of that Act (which is about superannuation income streams you have just before 1 July 2017); and (b) the sum of those transfer balance credits exceeds your transfer balance cap, but is less than or equal to $1,700,000; and (c) at the end of the period, the sum of all the transfer balance debits arising in your transfer balance account equals or exceeds the amount of the excess from paragraph (b). (1) Despite subsection 294‑10(2), a transfer balance credit arises under item 4 of the table in subsection 294‑25(1) of the Income Tax Assessment Act 1997 only in relation to a borrowing that arises under a contract entered into on or after 1 July 2017. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2017 is treated as if it arose under a contract entered into before 1 July 2017 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) on 1 July 2017, a transfer balance debit arose in your transfer balance account under item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997; and (b) the sum of all the transfer balance credits that arise in your transfer balance account under item 1 of the table in subsection 294‑25(1) of that Act exceeds the amount that would, apart from this section, be the amount of that debit. (2) Despite column 2 of item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997, the amount of the transfer balance debit is instead equal to the sum worked out under paragraph (1)(b) of this section. 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain > The object of this Subdivision is to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the following legislative changes: (a) the introduction of a transfer balance cap (as a result of Schedule 1 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016); (b) the exclusion of transition to retirement income streams (and similar income streams) from being superannuation income streams in the retirement phase (as a result of Schedule 8 to that Act). (a) starting on the start of the day on which the Bill that became the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 was introduced into the House of Representatives; and (a) at the start of the pre‑commencement period, a CGT asset of a fund is a segregated current pension asset of the fund; and (i) at a time (the cessation time) in the pre‑commencement period, the asset ceases to be a segregated current pension asset of the fund; or (ii) at the start of 1 July 2017 (also the cessation time), the asset ceases to be a segregated current pension asset of the fund because it supports a superannuation income stream covered by subsection 307‑80(3) of the Income Tax Assessment Act 1997; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (b) the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year is greater than nil; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and #### 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑115(3)(a), the fund makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the fund’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Subsection 295‑390(1) of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). > 2016‑17 non‑exempt proportion means 1 minus the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year. #### 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset (i) the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997 in respect of the trust for the 2016‑17 income year; (ii) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year; and (d) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and #### 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑125(3)(a), the trust makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the trust’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Section 295‑400 of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). (a) unless paragraph (b) applies—1 minus the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997; or (b) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage worked out by subtracting the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year from 100%. This Subdivision applies to an entity that is the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust. For the purposes of this Subdivision, an asset is a 30 June 1988 asset of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust if the entity owned it at the end of 30 June 1988. > Note: Section 295‑90 of the Income Tax Assessment Act 1997 treats these assets as having been acquired on 30 June 1988. (1) The first element of the cost base of each 30 June 1988 asset of the entity’s is the greater of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). (2) The first element of the reduced cost base of each 30 June 1988 asset of the entity’s is the lesser of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). the market value of the asset as at the end of 30 June 1988 is the average of the highest and lowest trade prices for identical assets recorded on 30 June 1988 in whichever of the following markets is applicable: (d) if, on that date, there was a State capital city market (other than the Sydney market) that recorded a higher volume of trading than the Sydney market in identical assets—that State capital city market; (2) For the purposes of this section, an asset is taken to have been listed on an Australian stock exchange on 30 June 1988 if, and only if, on that day the asset had the status of having been granted official quotation by a securities exchange within the meaning of the former Securities Industry Act 1980 or the law of a State or Territory corresponding to that former Act. (b) at any time during the period commencing at the time when the shares were acquired and ending at the end of 30 June 1988, the company paid an amount that was not a dividend to the entity in respect of the shares; (b) at any time during the period commencing at the time when the interest or unit was acquired and ending at the end of 30 June 1988, the trustee of the trust paid an amount to the entity in respect of the interest or unit, being: (i) in a case where the entity was exempt from tax for the year of income in which the payment was made—an amount that, if the entity had not been exempt from tax, would not have been the entity’s assessable income; or the cost base to the entity of the interest or unit as at 30 June 1988 is reduced by so much of the amount as is not attributable to a deduction allowed under former Division 10C or 10D of the Income Tax Assessment Act 1936. (1) Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (2) and (3) of this section apply if an entity exercises rights or options as mentioned in that section to acquire: (b) the greater of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (b) the lesser of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (4) The payment referred to in subsection (2) or (3) can include giving property. To the extent that the payment does, use the market value of the property in working out the amount of the payment. (1) A notice given under subsection 82AAT(1A) or (1CB) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑170 of the Income Tax Assessment Act 1997. (2) A notice given under subsection 82AAT(1C) or (1CD) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑180 of the Income Tax Assessment Act 1997. (1) A proportion of the ordinary income and statutory income of a continuously complying fixed interest ADF of an income year that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).  > Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the income year. > Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the income year. (4) A choice for the purposes of the definition of reckoning time in subsection (5) must be made on or before the date of lodgment of the income tax return of the ADF for the income year to which the choice relates, or before a later day allowed by the Commissioner. > continuously complying fixed interest ADF, in relation to an income year (the current year), means a fund that is a fixed interest complying ADF in relation to each of the following years: > current 25 May balance, in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time: (b) subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 September 1989 is to be added to the balance; (b) a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that day, made a deposit with the ADF that consisted wholly or partly of the roll‑over (as defined in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 as in force on that day) of an eligible termination payment as so defined, being an eligible termination payment that included a concessional component (as so defined). > fixed interest complying ADF, in relation to a year of income, means a complying ADF where both of the following conditions are satisfied: (a) not less than 90% of the amount that, apart from this section, would be the assessable income of the ADF of the income year (other than non‑arm’s length income or amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997) consists of any one or more of the following: (ii) any profit arising on the disposal, redemption, cancellation or maturity of a CGT asset referred to in paragraph 295‑85(3)(b) of the Income Tax Assessment Act 1997; (iii) an amount included in assessable income under Division 16E of Part III of the Income Tax Assessment Act 1936 (or would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply); (ii) virtual PST life insurance policies (as defined in the Income Tax Assessment Act 1997) issued by a life insurance company. > original 25 May balance, in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988. > reckoning time, in relation to an ADF in relation to an income year, means the beginning of the income year, or such other time during the income year as the ADF chooses in accordance with subsection (4). (6) This section does not apply to an ADF in relation to an income year unless the whole of the benefit that would accrue to the ADF from the application of this section in relation to the income year has been, or can reasonably expected to be, passed on to eligible depositors. An election made by the trustee of a complying superannuation fund under subsection 279(4) of the Income Tax Assessment Act 1936 that had effect for the income year of the fund in which 30 June 2007 occurs continues to have effect as if it had been made under section 295‑465 of the Income Tax Assessment Act 1997. Subdivisions 295‑I (no‑TFN contributions) and 295‑J (Tax offset for no‑TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006‑2007 income year ends on a day (the end day) after 1 July 2007 as if: (b) the entity’s no‑TFN contributions income for the entity’s 2007‑2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007‑2008 income year if the contributions concerned had been made in the entity’s 2007‑2008 income year. (2) Division 301 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section because you are a member of the fund in the same way as it would apply if the payments were superannuation member benefits paid to you from a complying superannuation fund. For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. Subdivision 301‑F of the Income Tax Assessment Act 1997 applies in relation to income years starting on or after 1 July 2007. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to the following in respect of an income year that starts on or before 1 July 2021: (b) the amendments of the Income Tax Assessment (1997 Act) Regulations 2021 made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023. (a) a superannuation benefit (the trigger benefit) was paid to a person in the 2020‑21 income year or an earlier income year; and (c) the trigger benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; and (2) The Commissioner cannot amend an assessment on the basis that a superannuation benefit paid to the person is a superannuation income stream benefit because of the amendments made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 if: (iii) the superannuation benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (a) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (b) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. (1) The Minister may, by legislative instrument, make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions) that: (a) relate to the amendments or repeals made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023; and (2) Without limiting subsection (1), rules made under this section before the end of the period of 12 months starting on the day that Schedule commences may provide that provisions of that Schedule, or any other Act or instrument, have effect with any modifications prescribed by the rules. Those provisions then have effect as if they were so modified. (2) Division 302 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section after another person’s death, because the other person was a member of that fund, in the same way as it would apply if the payments were superannuation death benefits paid to you from a complying superannuation fund. For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if: (b) just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. (2) For the purposes of Subdivision 82‑B of Division 82, Division 302 and section 303‑5 of the Income Tax Assessment Act 1997, the definition of death benefits dependant in section 302‑195 of that Act applies as if paragraphs (a) and (b) of the definition were replaced with the following paragraphs: (a) a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008 or a person who was formerly such a spouse; or (b) a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008, who is aged less than 18. (ii) a superannuation guarantee payment, a small superannuation account payment, an unclaimed money payment, a superannuation co‑contribution benefit payment or a superannuation annuity payment. (2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you at a time in the period: (i) a condition of release specified in item 107A or 207AA of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; or (ii) a condition of release specified in item 109AA of the table in Schedule 2 to the Retirement Savings Accounts Regulations 1997. (1) This section applies to a superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with section 292‑80B. (2) The superannuation benefit is not assessable income and is not exempt income to the extent that it does not exceed the amount mentioned in subsection (3). (3) The amount is the amount of excess non‑concessional contributions stated in the release authority in accordance with paragraph 292‑80A(3)(a), reduced (but not below zero) by the amount of any superannuation benefit that was not assessable income and not exempt income under a previous operation of subsection (2) in relation to the release authority. (4) The superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3). (a) you have an interest in a FIF (within the meaning of Part XI of the Income Tax Assessment Act 1936, as in force just before the commencement of item 37 of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010) (the paying fund); and (b) Subdivision 305‑B of the Income Tax Assessment Act 1997 applies in relation to the paying fund (see section 305‑55 of that Act); and (c) the paying fund transfers an amount to a complying superannuation fund in respect of you during the deduction year; and (d) you choose under section 305‑80 of the Income Tax Assessment Act 1997 that the amount, or part of the amount, is to be treated as assessable income of the complying superannuation fund; and (e) immediately before the transfer happens, there is a post‑FIF abolition surplus (within the meaning of the Income Tax Assessment Act 1936) for the paying fund in relation to you; and For the purposes of the definition of specified roll‑over amount in the Income Tax Assessment Act 1997, treat the taxable component of a directed termination payment (within the meaning of section 82‑10F) as the element untaxed in the fund of a superannuation benefit that is a roll‑over superannuation benefit. (1) This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007. > Note: This section also applies to an income stream replacing an earlier one because of an involuntary roll‑over (see section 307‑127). (2) Despite subsection 307‑125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows: (a) first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007); (b) next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits. The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit. (3) Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened: (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day; (ba) the holder of the superannuation interest is aged 60 or above on 1 July 2007, if none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day. (a) treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and (b) work out the tax free component of the superannuation interest for the purposes of section 307‑125 of the Income Tax Assessment Act 1997 under subsections (6) and (6A). (i) an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and (ii) the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time; (b) next, work out the unused undeducted purchase price (within the meaning of paragraph (a) of the definition of that term in subsection 27A(1) of the Income Tax Assessment Act 1936 just before the commencement of this section, and disregarding paragraphs (b) and (c) of that definition) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007; (c) next, work out the pre‑July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this section) of the eligible termination payment. (a) at least one superannuation income stream benefit was paid from the superannuation income stream before 1 July 1994; or (b) section 27AAAA of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007) applied to the superannuation income stream just before 1 July 2007; (7) For the purposes of paragraph (6)(c), disregard the value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment. (8) If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as: (b) if 1 or more other events mentioned in subsection (3) happened before the commutation—the time just before the earliest of those events happens. (a) references in that section to the later income stream (in relation to a time, or event happening, before the payment of that involuntary roll‑over superannuation benefit) include references to the earlier income stream; and (b) references in that section to the superannuation interest supporting the later income stream (in relation to a time, or event happening, before the payment of that benefit) include references to the earlier interest. (1) This section applies for the purposes of working out the amount of your total superannuation balance just before 1 July 2017. (2) The transfer balance mentioned in paragraph 307‑230(1)(b) of the Income Tax Assessment Act 1997 just before 1 July 2017 is taken to be equal to: (a) the sum of the transfer balance credits (if any) in your transfer balance account just after the start of 1 July 2017; less (b) the sum of the transfer balance debits (if any) arising in your transfer balance account on 1 July 2017 under item 4 of the table in subsection 294‑80(1) of that Act (about payment splits). (1) Section 307‑231 of the Income Tax Assessment Act 1997 applies in relation to borrowings that arise under contracts entered into on or after 1 July 2018. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2018 is treated as if it arose under a contract entered into before 1 July 2018 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) treat a deduction made under former section 279 of the Income Tax Assessment Act 1936 as having been made under section 295‑465 of the Income Tax Assessment Act 1997 instead; and (b) treat a deduction made under former section 279B of the Income Tax Assessment Act 1936 as having been made under section 295‑470 of the Income Tax Assessment Act 1997 instead. If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007‑2008 income year is, despite subsection 307‑345(1), the total of: (b) the amount by which $140,000 exceeds the upper limit for the 2006‑2007 income year (worked out under section 159SG of that Act). Division 316 of the Income Tax Assessment Act 1997 applies in relation to demutualisations occurring on or after 1 July 2008. If: (a) any assets held by the benefit funds of a life insurance company that is a friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a complying superannuation fund; and (b) the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer; the transfer is disregarded for any purposes of the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936. (1) In working out the amount that a life insurance company can deduct, in respect of life insurance policies that are disability policies (other than continuous disability policies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income. (2) In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection (1) applies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company’s liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320‑85(4) of that Act. If: (2) If the life insurance company wishes to include a part of an approved asset in its virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑87(2) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society establishes a virtual PST in the 2000‑01 income year, the calculation of the transfer values of the company’s virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year. (1) Subsection (3) applies for the purposes of subparagraph (b)(i) of the definition of virtual PST life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 259 of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007. (2) Subsection (3) also applies for the purposes of subparagraph (b)(i) of the definition of complying superannuation/FHSA life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 47 of Schedule 7 to the First Home Saver Accounts (Consequential Amendments) Act 2008. (3) Treat an annuity as having been purchased out of a superannuation lump sum or an employment termination payment, if the annuity was purchased: (b) out of an eligible termination payment (within the meaning of the Income Tax Assessment Act 1997, as in force just before the commencement mentioned in subsection (1) of this section). (2) If the life insurance company wishes to include a part of an approved asset in its segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (a) a life insurance company had a liability before 1 July 2000 under a life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and (c) there is a transfer of the company’s assets to the segregated exempt assets to meet that liability or that part of the liability; (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑105(1) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320‑225 of the Income Tax Assessment Act 1997 in the 2000‑01 income year, the calculation of the transfer values of the company’s segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year. Section 322‑25 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Part VC of the Insurance Act 1973 after 17 October 2008. 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you > new Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force after the commencement of this section. > old Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. > STS taxpayer means an STS taxpayer within the meaning of Division 328 of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. #### 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years (1) This section applies for the purpose of working out whether you are a small business entity (other than because of subsection 328‑110(4) of the Income Tax Assessment Act 1997) for the 2007‑08 or 2008‑09 income year. (2) You work out your aggregated turnover for the 2005‑06 or 2006‑07 income year as if the amendments made by Schedule 1 to the Tax Laws Amendment (Small Business) Act 2007 had been in force in relation to that year. (a) your aggregated turnover for the 2005‑06 income year (worked out in accordance with subsection (2)) is $2 million or more; but (b) your STS group turnover for that year (worked out under Subdivision 328‑F of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section) is less than $2 million. (2) The following provisions apply as if you are a small business entity for the income year in which you are winding up the business: #### 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you (1) For the purpose of working out whether you are a small business entity for the 2007‑08, 2008‑09, 2009‑10 or 2010‑11 income year (each a relevant income year) for the purposes of a provision to which subsection (3) applies: (2) An entity (the first entity) controls a discretionary trust for a relevant income year if, for any of the 4 income years (a previous income year) before that year: (a) if the previous income year is before the 2007‑08 income year—the trustee of the trust made a distribution of $100,000 or more to the first entity, any of its affiliates, or the first entity and any of its affiliates; or (i) the trustee of the trust paid to, or applied for the benefit of, the first entity, any of the first entity’s affiliates, or the first entity and any of its affiliates, any of the income or capital of the trust; and (ii) the percentage (the control percentage) of the income or capital paid or applied is at least 40% of the total amount of income or capital paid or applied by the trustee for that year. (1) This section sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (2) This section also sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (3) Any ordinary income that, apart from paragraph 328‑105(1)(a) of the Income Tax Assessment Act 1997 (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have derived before the changeover year (while you were using the STS accounting method) and you have not included in your assessable income because you have not received it is included in your assessable income for the changeover year. (4) Any general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, that, apart from paragraph 328‑105(1)(b) of that Act (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have incurred before the changeover year (while you were using the STS accounting method) and that you have not deducted because you have not paid them can be deducted for the changeover year. (b) for any later income year for which you are a small business entity but only if you used the STS accounting method for the income year before that later year. > Note: Example: You are a small business entity for the 2007‑08 and 2008‑09 income years and you continue to use the STS accounting method for those years. You are not a small business entity for the 2009‑10 income year so you cannot continue to use the STS accounting method for that year. Because you cannot use the STS accounting method for the 2009‑10 income year, you will not be able to use it again for a later income year even if you are a small business entity for that later year. In sections 328‑115 and 328‑120, STS accounting method means the accounting method that was required by the Income Tax Assessment Act 1997 to be used by STS taxpayers for the 2004‑05 income year. (b) you made a choice under subsection 328‑175(3) of old Subdivision 328‑D in relation to a depreciating asset you use to carry on a primary production business and for which you could deduct amounts under Subdivision 40‑F or 40‑G of the Income Tax Assessment Act 1997. (2) In determining whether you can choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997 in an increased access year, disregard subsection 328‑175(10) of that Act. (3) In applying paragraph 328‑175(10)(b) of that Act for the purpose of determining whether you can choose to use that Subdivision in any income year after the increased access years, disregard: (4) Paragraph 328‑180(1)(b) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that paragraph to $1,000: (i) first used the asset, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (i) first used the asset, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (i) first used the asset, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, on or after 1 July 2023 and on or before 30 June 2026. (a) a reference in that paragraph to the end of the income year in which you start to use the asset, or have it installed ready for use, for a taxable purpose were a reference to the earlier of: if: (i) first used the asset, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021. (5) Paragraph 328‑180(2)(a) or (3)(a) of the Income Tax Assessment Act 1997 applies to an amount included in the second element of the cost of an asset as if a reference in that paragraph to $1,000: (5A) For the purposes of determining whether, under subsection 328‑180(2) of the Income Tax Assessment Act 1997, you can deduct, for an income year (the current year), the taxable purpose proportion of an amount included in the second element of the cost of an asset, disregard paragraph (b) of that subsection if: (2) For the purposes of determining whether subsection 328‑180(1) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (b) of that subsection (which sets a limit of $1,000 on the cost of the asset) if, in the period beginning at the 2020 budget time and ending on 30 June 2023, you: (3) For the purposes of determining whether subsection 328‑180(2) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (a) of that subsection (which sets a limit of $1,000 on the amount) if the amount is included in the second element of the cost of the asset at any time in the period beginning at the 2020 budget time and ending on 30 June 2023. (4) In applying paragraph 328‑180(3)(a) of the Income Tax Assessment Act 1997 to an asset, disregard an amount included in the second element of the cost of the asset if the amount is deducted under subsection 328‑180(2) of that Act, as modified by subsection (3) of this section. (5) Section 328‑210 of the Income Tax Assessment Act 1997 applies as if the words “less than $1,000 but” in subsection (1) were disregarded, in relation to a deduction for an income year that ends: Subsection 328‑190(2) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that subsection to 15% were a reference to 57.5% if you are covered by section 40‑125 for the asset (which is about backing business investment). (1) A depreciating asset of yours that had been allocated to your general STS pool is treated as being allocated to your general small business pool. (2) A depreciating asset of yours that had been allocated to your long life STS pool is treated as being allocated to your long life small business pool. (3) If you made a choice, under subsection 328‑185(5) of old Subdivision 328‑D, not to have a depreciating asset allocated to your long life STS pool, the choice has effect for the purposes of subsection 328‑185(5) of new Subdivision 328‑D. (1) This section applies if a depreciating asset of yours is treated as being allocated to your general small business pool or long life small business pool under section 328‑185. (2) The opening pool balance of your general small business pool or long life small business pool for the 2007‑08 income year is taken to be the closing pool balance of your general STS pool or long life STS pool, as the case requires, for the 2006‑07 income year, reduced or increased by any adjustment required under section 328‑225 of new Subdivision 328‑D (about change in the business use of an asset). (a) you were not an STS taxpayer for the 2006‑07 income year (because you stopped being an STS taxpayer before that time); but (b) you are a small business entity for the 2007‑08 income year or a later income year and you choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets for that income year; the opening pool balance of your general small business pool or long life small business pool includes the sum of the taxable purpose proportions of the adjustable values of depreciating assets allocated to the pool under subsection 328‑185(3) of new Subdivision 328‑D for that year. (1) This section applies for the purposes of applying Subdivision 328‑D of the Income Tax Assessment Act 1997 for the 2012‑13 income year and later income years. (2) A depreciating asset that had been allocated to your long life small business pool is treated as being allocated to your general small business pool. (a) the closing pool balance of your general small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under section 328‑225 of that Act; and (b) the closing pool balance of your long life small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under that section. (1) This section applies if you chose to stop being an STS taxpayer for the 2005‑06 income year or the 2006‑07 income year. (2) You cannot choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets until at least 5 years after the income year for which you chose to stop being an STS taxpayer. > Note: Subdivision 328‑D of the Income Tax Assessment Act 1997 continues to apply to depreciating assets that have been allocated to your small business pools even if you are not a small business entity, or do not choose to use that Subdivision, for an income year: see section 328‑220 of that Subdivision. (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct 20% of particular expenditure for your 2023‑24 income year if: (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (d) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑450 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (6) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (ii) if the provider is a registered body of a kind listed in paragraph (2)(b), (c) or (d)—the training is within the provider’s scope of registration for that kind of registered body; and (d) each enrolment, or arrangement, for the provision of the training is made or entered into at or after 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022; and > Note: Paragraphs (b) and (c) mean this section will not apply to expenditure for on‑the‑job training or training provided by you in house. (a) a registered higher education provider (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); (b) a NVR registered training organisation (within the meaning of the National Vocational Education and Training Regulator Act 2011); (c) a registered education and training organisation (within the meaning of the Education and Training Reform Act 2006 (Vic.)); (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct for your 2023‑24 income year an amount that is equal to the sum of: (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (3) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑460 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (4) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (b) you incur the expenditure in the period starting at 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022 and ending at the end of: (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (4) For the purposes of paragraphs (1)(c) and (2)(c), in working out whether you can deduct an amount of expenditure on a depreciating asset, assume that: (b) throughout that effective life, you will use the asset for a taxable purpose to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose. (a) 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑470(1) or (3) applies in relation to the income year; and > Note: The deduction relates to the period of 1 July 2023 to 30 June 2024. An entity may have deducted an amount under paragraph (a) for a previous income year if the entity has a substituted accounting period. (2) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑470 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (3) Sections 8‑10, 40‑215 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (c) you start to use the asset, or have it installed ready for use, for any purpose after 30 June 2023 but before 1 July 2024; and (d) you start to use the asset, or have it installed ready for use, for a taxable purpose at a time (the start time) that is: (e) you are a small business entity, or an entity covered by subsection (4), for the income year that includes the start time; and (h) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) a new reasonably comparable depreciating asset that uses a fossil fuel (other than a use of which that is merely incidental) is available in the market at the start time; (ii) if the asset is being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than the other asset; (iii) if the asset is not being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than a new reasonably comparable depreciating asset that is available in the market at the start time; or (i) a depreciating asset (other than an asset excluded under subsection (6)) that uses electricity, or energy that is generated from a renewable source, to be more energy efficient; (iv) the use of electricity, or energy that is generated from a renewable source, by another depreciating asset to be monitored. (a) the amount is included in the second element of a depreciating asset’s cost under paragraph 40‑190(2)(a) of the Income Tax Assessment Act 1997; and (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (d) you are a small business entity, or an entity covered by subsection (4), for the income year in which the expenditure is incurred; and (i) if the asset could use a fossil fuel (other than a use of which that is merely incidental)—the asset to only use electricity, or energy that is generated from a renewable source; (ii) if the asset uses electricity, or energy that is generated from a renewable source—the asset to be more energy efficient; (g) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) For the purposes of paragraph (1)(b) or (3)(b), in working out whether you can deduct an amount of expenditure assume that: (i) for the purposes of paragraph (1)(b)—to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose; or (ii) for the purposes of paragraph (3)(b)—to the same extent as you use it for a taxable purpose in the income year in which the expenditure is incurred. (b) expenditure (other than expenditure referred to in subparagraph (3)(e)(i)) on an asset that can use a fossil fuel (other than a use of which that is merely incidental); (c) an asset that solely or predominantly generates electricity from a renewable source (for example, photovoltaic cells) or expenditure on such an asset; (d) an asset, or expenditure, being capital works for which you can deduct an amount under Division 43 of the Income Tax Assessment Act 1997; > Note: Subsections (1) and (3) also do not apply to an item of trading stock because such an asset is not a depreciating asset: see section 40‑30 of the Income Tax Assessment Act 1997. A reference in each of the following provisions of the Income Tax Assessment Act 1997 to a registration under section 27A of the Industry Research and Development Act 1986 includes a reference to a registration under former section 39J of that Act: (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) the R&D entity cannot deduct an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from: (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D entity could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:22pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the R&D entity is taken to be able to deduct under subsection 355‑315(2) of the new Act that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the R&D entity’s assessable income for the event year under subsection 355‑315(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 for the asset, the R&D entity is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑446 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the R&D entity is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑465 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: Section 355‑315 of the new Act would otherwise apply for the event in a case where the R&D entity had new law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by an R&D partnership; and (i) the partner can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the partner chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D partnership could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the partner is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:21.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D entity</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D partnership</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the partner is taken to be able to deduct under subsection 355‑525(2) of the new Act the partner’s proportion of that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the partner’s assessable income for the event year under subsection 355‑525(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partner’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if one or more partners (including the partner) in the R&D partnership is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset, the partner is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑448 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the partner is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑467 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s deductions under section 355‑520 of the new Act mentioned in subsection (4A) of this section. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the partner for the event, do so apply to the partner for the event. > Note 1: Section 355‑525 of the new Act would otherwise apply for the event in a case where the partner had new law deductions. Item 7 of the table in subsection 57‑110(2) in Schedule 2D to the Income Tax Assessment Act 1936 applies as if the deduction rules set out in the final column of that item also included former sections 73BA and 73BH of the Income Tax Assessment Act 1936. For the purposes of step 1 of the method statement in subsection 355‑415(2) of the Income Tax Assessment Act 1997, also disregard amounts that have already been taken into account under former subsection 73B(14AA) of the Income Tax Assessment Act 1936 for the R&D entity, the grouped entity and the R&D activities for an earlier income year. (1) This section applies if, apart from former paragraph 73B(10)(a) of the Income Tax Assessment Act 1936, an eligible company could deduct advance R and D expenditure in one or more income years commencing on or after 1 July 2011. > Note: That deduction would be under former section 73B of that Act as that former section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (a) apart from Subdivision H (prepaid expenditure) of Division 3 of Part III of the Income Tax Assessment Act 1936, an eligible company can deduct an amount under former section 73B, 73BA, 73BH, 73QA, 73QB or 73Y of that Act for an income year commencing before 1 July 2011; and (c) apart from former paragraph 73B(10)(a) of that Act, the eligible company could deduct an amount, as a result of that application of that Subdivision, for an income year commencing on or after 1 July 2011. > Note: That deduction would be under that Act as it applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (3) Former paragraph 73B(10)(a) of that Act is taken to apply to those income years commencing on or after 1 July 2011 as if the reference in that former paragraph to section 39J of the Industry Research and Development Act 1986 were a reference to section 27A of that Act. (4) An expression used in this section that is also used in former section 73B of the Income Tax Assessment Act 1936 has the same meaning in this section as it has in that former section. This Subdivision applies to core technology (within the meaning of former section 73B of the Income Tax Assessment Act 1936) if: (a) you incurred core technology expenditure (within the meaning of that former section) in an income year commencing before 1 July 2011 in relation to the core technology under one or more contracts entered into at or after the time referred to in former subsection 73B(12) of that Act; and (b) that expenditure (the undeducted expenditure) cannot be deducted for the last income year commencing before 1 July 2011. (1) This section applies for the purposes of Division 40 of the Income Tax Assessment Act 1997, other than sections 40‑292 and 40‑293 of that Act, if the core technology (the asset) is a depreciating asset. (2) Disregard this section, including its effect on the amount you can deduct under section 40‑25 of that Act for the asset, for the purposes of working out: (3) The asset’s opening adjustable value for the first income year that commences on or after 1 July 2011 (the first new income year) is equal to the amount of the undeducted expenditure. (4) Subsection 40‑75(2) of the Income Tax Assessment Act 1997 applies to the asset as if the first new income year were a change year (within the meaning of that subsection). If the core technology is not a depreciating asset, you can deduct the undeducted expenditure in equal proportions over a period of 5 income years starting in the first income year commencing on or after 1 July 2011. To work out the film component (if any) of your tax loss for the 1997‑98 income year or a later income year, apply former section 375‑805 of the Income Tax Assessment Act 1997. If you incurred a film loss for the purposes of former section 79F (Film losses of 1989‑90 to 1996‑97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989‑90 to 1996‑97 income years, that film loss is the film component of your tax loss for that income year. (1) To work out your film loss (if any) for the purposes of the Income Tax Assessment Act 1997 for the 1989‑90 or a later income year, apply former section 375‑810 of that Act. (2) You can deduct in the 1997‑98 or a later income year your film loss for any of the 1989‑90 to 1996‑97 income years only to the extent that it has not already been deducted. (1) Division 392 of the Income Tax Assessment Act 1997 applies to assessments for the 1998‑99 income year and later income years. (a) it had applied to your assessment for each income year before the 1998‑99 income year for which Division 16 of Part III of the Income Tax Assessment Act 1936 applied in relation to your income; and (b) you had carried on a primary production business during each income year before the 1998‑99 income year when you carried on a business of primary production; and (c) for each income year before the 1998‑99 income year you had a basic taxable income equal to your taxable income for the income year for the purposes of Division 16 of Part III of the Income Tax Assessment Act 1936. > Note: Section 149A of the Income Tax Assessment Act 1936 identifies what your taxable income for an income year is for the purposes of Division 16 of Part III of that Act. Division 392 of the Income Tax Assessment Act 1997 does not apply to your assessment for the 1998‑99 income year or a later income year if you made an election under section 158A (Election that Division not apply) of the Income Tax Assessment Act 1936 relating to an income year before the 1998‑99 income year. 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 A reference in Division 393 of the Income Tax Assessment Act 1997 to a deduction under section 393‑5 of that Act for making a farm management deposit is taken to include a reference to a deduction under section 393‑10 in Schedule 2G to the Income Tax Assessment Act 1936, as in force just before the commencement of this section, if the deposit was made before the 2010‑11 income year. #### 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 (b) the deposit was made with an FMD provider as a result of a request to which section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, applied; the unrecouped FMD deduction in respect of the deposit at that time is equal to the amount of the unrecouped deduction (within the meaning of the former subsection 159GA(3) of the Income Tax Assessment Act 1936) in respect of the deposit immediately before it ceased to be a deposit under the Loan (Income Equalization Deposits) Act 1976. > Note: This means that the unrecouped deduction relating to the deposit under the Loan (Income Equalization Deposits) Act 1976 continues to apply (by becoming an unrecouped FMD deduction) when the deposit is transferred to an FMD provider as a farm management deposit. The Loan (Income Equalization Deposits) Act 1976 was repealed on 22 February 2005. If a beneficiary of a trust was covered by paragraph (c) of the definition of primary producer in section 393‑25 in Schedule 2G to the Income Tax Assessment Act 1936 in the 2009‑10 income year, treat subsection 393‑25(3) of the Income Tax Assessment Act 1997 as having applied to the beneficiary for the purpose of determining the maximum number of choices that the trustee may make under subsection 393‑27(2) of that Act for the 2010‑11 income year. (a) a farm management deposit of an owner was unclaimed moneys for the purposes of section 69 of the Banking Act 1959; and (2) For the purpose of subsection 393‑10(1) of the Income Tax Assessment Act, treat the repaid unclaimed moneys as a repayment of the deposit of the owner. (3) To avoid doubt, the payment of unclaimed moneys to the Commonwealth under section 69 of the Banking Act 1959 is not a repayment of the deposit of the owner for the purposes of Division 393 of the Income Tax Assessment Act 1997. 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 #### 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 If a farm management deposit was made with an FMD provider as a result of a request under section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, then: (a) subsections 393‑40(1) to (4) of the Income Tax Assessment Act 1997 apply as if the day the deposit was made was the day on which the deposit was originally made under the Loan (Income Equalization Deposits) Act 1976; and (1) A copyright collecting society to which section 51‑43 of the Income Tax Assessment Act 1997 applies, may elect that, from 1 July 2004, the section apply to all ordinary income, and statutory income, collected or derived by the society on or after 1 July 2004. Division 420 of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division. Subdivision 615‑C of the Income Tax Assessment Act 1997 applies to you with the modifications set out in this Subdivision if you chose to obtain a roll‑over involving \*shares or units that: (b) were your trading stock, or revenue assets, at the time immediately before that disposal, redemption or cancellation. (1) Disregard subparagraph 615‑45(a)(ii), and paragraph 615‑45(b), of the Income Tax Assessment Act 1997 if the roll‑over relates to \*shares that were disposed of, redeemed or cancelled. (2) For each of the \*shares in the interposed company that you acquired in return for those of your shares or units in the original entity that were your \*trading stock at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  (2) For the purpose of calculating any profit or loss on a future disposal, cessation of ownership, or other realisation of a \*share in the interposed company that you acquired in return for those of your shares or units in the original entity that were \*revenue assets at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  Subdivision 620‑A of the Income Tax Assessment Act 1997 applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. (1) Part 3‑90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Act (No. 1) 2002 and amended by: (2) Section 713‑50 of the Income Tax Assessment Act 1997 (about factors to consider in determining destination of distribution by non‑fixed trust) applies for the purposes of this Part in the same way as it applies for the purposes of Part 3‑90 of that Act. ### Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly‑owned subsidiary of the entity (the future head company) that became the head company of the group; or (ii) at some time during that period, the entity was a wholly‑owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (ii) it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (1) If a group is a transitional group, its head company may, subject to subsection (3), choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (3) If the choice is to be made after the end of the period mentioned in paragraph (2)(a) and before the end of the day mentioned in paragraph (2)(b), it cannot be made unless each entity in relation to which the conditions in subsection (5) are satisfied has agreed to it being made. (a) the entity (the leaving entity) ceased to be a subsidiary member of the group before the choice was made (in a subsection (3) case) or before the revocation took place (in a subsection (4) case); and (b) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; and (c) the asset had become that of the head company because that section applied when a chosen transitional entity (whether or not the same entity as the leaving entity) became a subsidiary member. Section 716‑855 applies for the purposes of this Division in the same way as that section applies for the purposes of Part 3‑90 of the Income Tax Assessment Act 1997. is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705‑B of that Act and with this Division. 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity Section 701‑10 (cost to head company of assets of joining entity) and subsection 701‑35(4) (setting value of trading stock at tax‑neutral amount) of the Income Tax Assessment Act 1997 do not apply to the assets of a chosen transitional entity. > Note: The fact that the head company inherits the entity’s history under section 701‑5 of that Act when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time. #### 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities (2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non‑chosen subsidiary) is worked out in a special way. (b) for each sub‑group (see subsection (6)) that exists in relation to the non‑chosen subsidiary—the sub‑group’s notional allocable cost amount (see subsection(5)) for the non‑chosen subsidiary. (4) The head company adjusted allocable amount for the non‑chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if; (b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of head company’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub‑group in relation to the non‑chosen subsidiary. (5) For each sub‑group that exists in relation to the non‑chosen subsidiary, there is a sub‑group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non‑chosen subsidiary if: (a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non‑chosen subsidiary and the entities comprising the sub‑group; and (c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub‑group membership interests (see subsection (6)) in relation to the sub‑group, and any such entity held those membership interests during the period when it actually held them; and (d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of chosen transitional entity’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub‑group. (6) If a chosen transitional entity holds membership interests in a non‑chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non‑chosen subsidiary: (a) the chosen transitional entity and each interposed non‑chosen subsidiary comprise a sub‑group in relation to the non‑chosen subsidiary (unless the non‑chosen subsidiary is included in a sub‑group in relation to another non‑chosen subsidiary); and (i) the membership interests that the chosen transitional entity holds directly in the non‑chosen subsidiary or in any of the interposed non‑chosen subsidiaries; (ii) the membership interests that each interposed non‑chosen subsidiary holds directly in the non‑chosen subsidiary or in any of the other interposed non‑chosen subsidiaries. #### 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities If any provision of the Income Tax Assessment Act 1997 would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply. > Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred. (1) This section has effect for the purposes of applying section 705‑70 (step 2 of allocable cost amount) of the Income Tax Assessment Act 1997 in relation to a transitional entity. (2) In spite of subsection 705‑70(1A) of that Act, if the amount of an accounting liability of the transitional entity would be different when it becomes an accounting liability of the transitional group, that difference is not taken into account in working out the amount of the liability. #### 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different (a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset (the roll‑over asset) for which there was: (ii) roll‑over relief under section 40‑340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and (i) became an asset of the head company when the transitional group came into existence because subsection 701‑1(1) (the single entity rule) of that Act applies; or differs at that time from what it would have been if the act, transaction or event that gave rise to the CGT event had not occurred in relation to the roll‑over asset; then the provisions mentioned in subsection (2) apply as if the act, transaction or event had not occurred in relation to the roll‑over asset. (a) the act, transaction or event mentioned in subsection (1) happened before a demerger and in connection with the demerger; and (b) before the transitional group came into existence, at least one of the following entities ceased to be a member of the demerger group because of the demerger: (i) the originating company in relation to the roll‑over, or the transferor in relation to the roll‑over relief, was a foreign resident; and (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as a transitional foreign‑held subsidiary of the group. #### 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets (1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied. (2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset. (a) the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and (b) former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset. (4) The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group. (6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses. #### 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets (b) just before the transitional group came into existence, the entity that became the head company held a pre‑CGT asset; and (d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre‑CGT asset and is held by the head company only because the entity is taken by subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company. (2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence. #### 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity (1) This section provides for an addition to the step 1 amount for working out under section 711‑20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity) that ceases to be a subsidiary member of the transitional group at a time (the leaving time), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701‑1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount for paragraph</span><span> </span><span>(2)(c)</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">If, because of the circumstances described in paragraphs</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(a) and (b):</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">The amount is:</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:180.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following provisions applied to the entity:</span></p><p class="Tablea"><span>(a) former section</span><span> </span><span>61A of the </span><span style="font-style:italic">Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(b) former Subdivision</span><span> </span><span>57</span><span>‑</span><span>I in Schedule</span><span> </span><span>2D to the</span><span style="font-style:italic"> Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(c) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(4) of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td><td style="width:148.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the amount treated as being the cost of the asset under that provision; and</span></p><p class="Tablea"><span>(b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>2</span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following subsections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span><span> applied to the entity:</span></p><p class="Tablea"><span>(a) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(5);</span></p><p class="Tablea"><span>(b) 58</span><span>‑</span><span>70(3)</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The amount treated as being the cost, or the first element of the cost, of the asset under that subsection</span></p></td></tr></tbody></table> ``` (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997, as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="4" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amounts and provisions for different dates of acquisition</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Date of the acquisition</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Amount</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Provision of Division</span><span style="font-weight:bold"> </span><span style="font-weight:bold">58 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> applying to the acquisition and the working out of the amount</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:76.7pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>160</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>220</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>After 30</span><span> </span><span>June 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>First element of the cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subsection</span><span> </span><span>58</span><span>‑</span><span>70(5)</span></p></td></tr></tbody></table> ``` > Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. > Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and ### Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: #### 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70‑45 to 70‑70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420‑51 to 420‑58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (a) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority‑owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority‑owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority‑owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority‑owned entity became a subsidiary member of the group, there was roll‑over relief under section 40‑340 of the Income Tax Assessment Act 1997. (a) while the asset is, because subsection 701‑1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, its tax cost setting amount is taken to be equal to the continuing majority‑owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711‑30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997. (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset becomes that of an entity (a new asset holder) other than the head company because subsection 701‑1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder) acquiring some or all of the membership interests in the new asset holder; and (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset is acquired by another entity (a new asset holder) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll‑over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value asset just before the acquisition; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 #### 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 (b) members of the consolidated group or the MEC group mentioned in subsection 104‑500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701‑1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701‑1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (3) If this section applies, neither subsection 104‑500(4) nor subsection 104‑500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year. ### Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C‑B); and (b) modifies certain rules in Part 3‑90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C‑C). > Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719‑2 and 719‑10 of this Act). 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership #### 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(ii) of that Act (see subsection 719‑2(3) of this Act). (b) a trust (a non‑resident trust) that does not meet the requirements in any item of the table in section 703‑25 of the Income Tax Assessment Act 1997. (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non‑resident company or a non‑resident trust; or Test entity must be a subsidiary member on assumption that non‑resident companies and non‑resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non‑resident company or non‑resident trust were a subsidiary member of the group. (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv). #### 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(iii) of that Act (see subsection 719‑2(3) of this Act). (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C‑10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3). If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C‑10 are met; and (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (ii) an entity that is a transitional foreign‑held indirect subsidiary of the group because of another application of this paragraph; Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign‑held indirect subsidiary would need to have satisfied the set of requirements in either section 701C‑10 or 701C‑15 (1) This Subdivision applies if an entity (the transitional foreign‑held joining entity) that is a transitional foreign‑held subsidiary or a transitional foreign‑held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time) the group comes into existence. (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign‑held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign‑held indirect subsidiary that becomes a subsidiary member at that time takes account of this. (a) section 701‑10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); apply, for the purposes of setting the tax cost of an asset of the transitional foreign‑held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign‑held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. > Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign‑held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign‑held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign‑held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign‑held subsidiary and the other entity. > Note 2: If the transitional foreign‑held joining entity is a transitional foreign‑held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705‑A of the Income Tax Assessment Act 1997, in its application in accordance with Subdivision 705‑B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company. Subsection 701‑35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax‑neutral amount) does not apply to the assets of the transitional foreign‑held joining entity if it is a transitional foreign‑held subsidiary. Section 701‑15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: (a) this section applies to each membership interest in the transitional foreign‑held subsidiary that is held by an entity (an eligible non‑resident) of a kind mentioned in subparagraph 701C‑20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign‑held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701‑1(2) of the Income Tax Assessment Act 1997 applies to the eligible non‑resident in the same way as it applies to the head company. Section 711‑5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: > Note: If the leaving entity is a transitional foreign‑held subsidiary (within the meaning of section 701C‑20 of the Income Tax (Transitional Provisions) Act 1997), this Division will, in accordance with subsection 701‑15(4) of this Act (see section 701C‑40 of the first‑mentioned Act), apply to membership interests that an eligible non‑resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity. (1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707‑C of the Income Tax Assessment Act 1997. (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period. (1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if: (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (d) the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997. (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: (1) The head company of a consolidated group may make a choice in the approved form to apply section 701D‑10 to another entity. (2) However, the head company cannot make that choice if subsection 701D‑10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (a) an asset of the head company because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701‑55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40‑77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40‑77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40‑285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount. (b) after the asset became an asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). > Note: The final entity will be different from the head company if an entity (the leaving entity) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40‑285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. > Note: The final entity will be entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701‑5 (the entry history rule) of that Act and perhaps also section 701‑40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity) became a subsidiary member of the group; and It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). > Note: In some cases, section 705‑47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40‑285(3) of this Act. If: (b) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and subsection 40‑285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701‑10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997. > Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997. (1) For the purposes of Part 3‑90 of the Income Tax Assessment Act 1997, this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960‑G of that Act whether the interest or right is a membership interest of the entity in the other entity. > Note: Under Subdivision 960‑G of the Income Tax Assessment Act 1997, a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001) apply to transactions in relation to the interest or right at the relevant time. Despite the amendments of section 703‑35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) If an entity (the joining entity) to which section 40‑75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time), this Subdivision applies in relation to: (ii) became assets of the head company of the group at the joining time because of section 701‑1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure. (1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). (2) If the joining entity could not deduct an amount under Subdivision 40‑B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701‑55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40‑35, 40‑37, 40‑40 or 40‑43 treated the joining entity as holding a notional asset. > Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705‑30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. (a) deductions under former Subdivision 330‑A, 330‑C or 330‑H of the Income Tax Assessment Act 1997, or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated an entity as holding because of the expenditure. (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); > Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40‑75(4) of this Act, but may have been reset since under Subdivision 40‑B of the Income Tax Assessment Act 1997. > Note 2: The effective life of a notional asset is specified by whichever one of sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act is relevant to the notional asset. (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (9) Section 705‑55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705‑45 of that Act. > Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705‑40 of the Income Tax Assessment Act 1997. (a) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701‑5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. > Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705‑305(3). (ii) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707‑A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member. 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value #### 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707‑320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor) other than the real loss‑maker mentioned in subsection 707‑315(1) of that Act for the bundle; and (b) both the real loss‑maker and the value donor became members of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (ca) neither the real loss‑maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (ii) a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (ii) section 713‑540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (2) It must have been possible for the real loss‑maker to have transferred the loss to the value donor under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss‑maker at the initial transfer time the amount worked out using the formula:  > Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707‑327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss‑maker to the transferee. > total of real loss‑maker’s non‑foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss‑makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) included in a bundle of losses: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. #### 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value (1) This section affects the calculation of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707‑325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936, in the bundle). > Note: This section does not affect the calculation of the real loss‑maker’s modified market value for other purposes (such as the real loss‑maker being a value donor for the purposes of another application of section 707‑325 of this Act). (3) One condition is that the event was an injection of capital directly into the real loss‑maker by the value donor mentioned in section 707‑325 of this Act. (c) that would have caused subsection 707‑325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss‑maker’s modified market value (even if no other events described in subsection 707‑325(4) of that Act had occurred), apart from this section. (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss‑maker (whether or not the event also involved either the value donor or the real loss‑maker); or (1) This section has effect for the purposes of working out under Subdivision 707‑C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707‑325, as if there were added to the modified market value of the real loss‑maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (c) the loss is not a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707‑A of that Act at the initial transfer time had the company: > Note: This section has effect even if the amount added to the real loss‑maker’s modified market value under section 707‑325 is nil because the value donor’s modified market value is nil. (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707‑325, as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (4) If the transferee mentioned in subsection 707‑325(1) chooses, sections 707‑310, 707‑335 (except paragraph 707‑335(2)(a)) and 707‑340 of the Income Tax Assessment Act 1997 (and subsections 707‑315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: > Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707‑325(1)(d) and (e) and subsection 707‑325(2) in an application of section 707‑325 separate from the application of that section mentioned in paragraph (1)(a) of this section. > Note: This means that a loss that provided a basis for section 707‑325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. (b) in connection with the requirement that it must have been possible for a company (the notional transferor) to transfer to another company (the notional transferee) for an income year a loss under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997. (b) ends immediately after the initial transfer time mentioned in subsection 707‑320(1) of the Income Tax Assessment Act 1997. > Note: For the purposes of identifying the trial year using the definition in section 707‑120 of the Income Tax Assessment Act 1997, the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time. (1) Subsection (3) of this section affects the calculation, under section 707‑325 of the Income Tax Assessment Act 1997 and section 707‑325 of this Act, of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (the formation time) the group became a consolidated group; and (b) the provisions described in subsection 707‑327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707‑327(1)(b) and (c) of this Act as if the bundle included the loss; and (d) subsection 707‑325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707‑325(1) of this Act chooses that this section apply in relation to the real loss‑maker. (2) Section 707‑325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. (3) Disregard for the purposes of subsection 707‑325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707‑325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or > Note: Disregarding such an event could have a direct or indirect effect on the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss‑maker’s modified market value calculated under section 707‑325 of the Income Tax Assessment Act 1997, if the real loss‑maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707‑325 of this Act to add an amount to the real loss‑maker’s modified market value for those purposes. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) that: (b) was transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from an entity other than the real loss‑maker. (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997. Disregard an event that is described in subsection 707‑325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707‑325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004. (1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss‑maker) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time) the transferee became the head company of a consolidated group; and (ii) the conditions in one or more of paragraphs 165‑15(1)(a), (b) and (c) did not exist in relation to the real loss‑maker; and (da) the real loss‑maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non‑transferred losses) of the same sort that the transferee made without a transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non‑transferred losses). (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. <table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Limit on utilising the losses</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For this income year:</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the losses that the transferee may utilise cannot exceed:</span></p></td></tr></thead><tbody><tr><td style="width:20.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:120.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The first income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span style="font-size:8pt; vertical-align:2pt">1</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The second income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) </span><span style="font-size:8pt; vertical-align:2pt">2</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the amount of the losses utilised for the income year mentioned in item</span><span> </span><span>1</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The third income year ending after the initial transfer time, or a later income year</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time</span></p></td></tr></tbody></table> ``` (4) Subdivision 707‑C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707‑A of that Act. > Note: This has 2 effects. First, Subdivision 707‑C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707‑A of that Act). (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). (7) This section does not limit the transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company. In working out when a choice may be made under subsection 707‑325(5), 707‑327(5), 707‑328A(4) or 707‑350(5), ignore losses to which section 713‑535 of the Income Tax Assessment Act 1997 applies. > Note: That section deals with losses transferred under Subdivision 707‑A of that Act from certain wholly‑owned subsidiaries of life insurance companies that are members of a consolidated group. Section 707‑405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act. (1) This section reduces the adjustable value of a notional asset that section 40‑35, 40‑37, 40‑38, 40‑40 or 40‑43 treats the head company of a consolidated group as holding, if: (b) that section treats the leaving entity as holding a notional asset because of section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997. > Note: Section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time. The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences. (1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event) happening involving an entity (the originating entity) and another entity (the recipient entity) if: (a) the event occurs in connection with a life insurance company (the member life insurance company) becoming a member of a consolidated group; and (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest) in a company or in another trust. (a) a life insurance company transfers an asset (also the original asset) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320‑200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset) to its segregated exempt assets where, apart from this Subdivision, section 320‑255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event) is made in connection with the life insurance company (also the member life insurance company) becoming a member of a consolidated group. (1) This Subdivision applies only if the originating entity (for a section 713‑505 case) or the life insurance company (for a section 713‑510 case) chooses that it apply. (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713‑510 of the Income Tax Assessment Act 1997; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713‑510 of the Income Tax Assessment Act 1997; and (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs. This Act, and the Income Tax Assessment Act 1997, apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group. (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain) that the originating entity would have made as a result of the deferral event is disregarded; and (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount) under paragraph 320‑15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (1) This section operates if, after the deferral event happens, another event (the new event) happens where the new event is: (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (i) the original asset being transferred to or from the company’s virtual PST under section 320‑180, 320‑185 or 320‑195 of the Income Tax Assessment Act 1997; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320‑235, 320‑240 or 320‑250 of that Act; or (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. > Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713‑505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (1) For a section 713‑505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713‑535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: (a) an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group at a time (the leaving time); and (b) but for the cessation of membership and section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision. Sections 716‑340 and 716‑345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. <table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:345.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Extended operation of sections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 1</span><br><span style="font-weight:bold">Sections</span><span style="font-weight:bold"> </span><span style="font-weight:bold">716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">340 and 716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">345 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> operate in relation to:</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 2</span><br><span style="font-weight:bold">In the same way as they operate in relation to:</span></p></td></tr></thead><tbody><tr><td style="width:5.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:161.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>46</span><span>‑</span><span>90 of that Act</span></p></td><td style="width:156.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>40</span><span>‑</span><span>455 of that Act</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software pool created under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure allocated to a software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Software, expenditure on which was in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>In</span><span>‑</span><span>house software, expenditure on the development of which is allocated to a software development pool</span></p></td></tr></tbody></table> ``` (1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: Section 703‑30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004. (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time) a wholly‑owned subsidiary of the entity that became the head company of the group (the head entity), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier‑1 company of the group at the formation time. Despite the amendment of section 719‑30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) Section 719‑160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719‑160(3) of the Income Tax Assessment Act 1997. (3) However, that effect of section 719‑160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division. (2) Paragraphs 701‑1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier‑1 company at the time the MEC group came into existence. (a) the entity and one or more other entities were members of a potential MEC group as eligible tier‑1 companies, throughout the period: (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier‑1 company, at the time the transitional group came into existence. To avoid doubt, sections 707‑325 and 707‑327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719‑305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707‑A of that Act. Subsection 719‑325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006. (1) A reference in an agreement to item 25 of the table in subsection 721‑10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: (1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: Division 725 applies to a scheme entered into on or after 1 July 2002. It also applies to a scheme entered into on or after 27 June 2002, but only if: ### Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (1) Division 727, as inserted by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 and amended by the New Business Tax System (Consolidation and Other Measures) Act 2003, applies to a scheme entered into on or after 1 July 2002. (b) a presumed indirect value shift that happens under the scheme and affects a realisation event that happens on or after 1 July 2002. (a) the economic benefits taken into account in determining that the scheme has resulted in that indirect value shift or presumed indirect value shift include economic benefits provided by: > Note: In that case, the consequences of the trigger event are worked out under Division 138 or 139 of the Income Tax Assessment Act 1997: see items 13 and 14 of Schedule 15 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002. (1) An indirect value shift does not have consequences under Division 727 of the Income Tax Assessment Act 1997 if, to the extent of at least 95% of their total market value, the greater benefits consist entirely of: (a) a right to have services that are covered by section 727‑240 of that Act provided directly by the losing entity to the gaining entity; or (d) if the losing entity’s 2002‑2003 income year ends before 30 June 2003—the start of the losing entity’s 2004‑2005 income year. (2) For the purposes of section 727‑850 (about a presumed indirect value shift affecting a realisation event) of the Income Tax Assessment Act 1997, subsection (1) of this section applies to the presumed indirect value shift: #### 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (2) Paragraph 727‑470(2)(a) of the Income Tax Assessment Act 1997 (as in force immediately before the commencement of this section) continues to have effect in relation to the indirect value shift as if the repeals and amendments made by Schedule 1, Parts 1 and 2 of Schedule 3 and Schedule 8 to the Tax Laws Amendment (Small Business) Act 2007 had not been made. ## Subdivision 320 ‑A—Preliminary ## 320‑5 Life insurance companies that are 320‑5 Life insurance companies that are friendly societies If: (a) any assets held by the benefit funds of a life insurance company that is a friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a complying superannuation fund; and (b) the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer; the transfer is disregarded for any purposes of the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936. ## Subdivision 320 ‑C—Deductions and capital losses ## 320‑85 Deduction for increase in value o 320‑85 Deduction for increase in value of liabilities under risk components of life insurance policies (1) In working out the amount that a life insurance company can deduct, in respect of life insurance policies that are disability policies (other than continuous disability policies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income. (2) In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection (1) applies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company’s liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320‑85(4) of that Act. ## Subdivision 320 ‑D—Taxable income and tax loss of life insurance companies ## 320‑100 Savings—tax losses of previous i 320‑100 Savings—tax losses of previous income years If: ## Subdivision 320 ‑F—Virtual PST ## 320‑170 Transfer of part of an asset to 320‑170 Transfer of part of an asset to a virtual PST (2) If the life insurance company wishes to include a part of an approved asset in its virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. ## 320‑175 Transfers of assets to virtual P 320‑175 Transfers of assets to virtual PST (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑87(2) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society establishes a virtual PST in the 2000‑01 income year, the calculation of the transfer values of the company’s virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year. ## 320‑180 Deferred annuities purchased bef 320‑180 Deferred annuities purchased before 1 July 2007 (1) Subsection (3) applies for the purposes of subparagraph (b)(i) of the definition of virtual PST life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 259 of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007. (2) Subsection (3) also applies for the purposes of subparagraph (b)(i) of the definition of complying superannuation/FHSA life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 47 of Schedule 7 to the First Home Saver Accounts (Consequential Amendments) Act 2008. (3) Treat an annuity as having been purchased out of a superannuation lump sum or an employment termination payment, if the annuity was purchased: (b) out of an eligible termination payment (within the meaning of the Income Tax Assessment Act 1997, as in force just before the commencement mentioned in subsection (1) of this section). ## Subdivision 320 ‑H—Segregation of assets for the purpose of discharging exempt life insurance policies ## 320‑225 Transfer of part of an asset to 320‑225 Transfer of part of an asset to segregated exempt assets (2) If the life insurance company wishes to include a part of an approved asset in its segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. ## 320‑230 Transfers of assets to segregate 320‑230 Transfers of assets to segregated exempt assets (a) a life insurance company had a liability before 1 July 2000 under a life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and (c) there is a transfer of the company’s assets to the segregated exempt assets to meet that liability or that part of the liability; (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑105(1) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320‑225 of the Income Tax Assessment Act 1997 in the 2000‑01 income year, the calculation of the transfer values of the company’s segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year. ## Division 322 Assistance for policyholders with insolvent general insurers ## Subdivision 322 ‑B—Tax treatment of entitlements under financial claims scheme ## 322‑25 Application of section 322‑25 of 322‑25 Application of section 322‑25 of the Income Tax Assessment Act 1997 Section 322‑25 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Part VC of the Insurance Act 1973 after 17 October 2008. ## 322‑30 Application of section 322‑30 of 322‑30 Application of section 322‑30 of the Income Tax Assessment Act 1997 ## Part 3 ‑45—Rules for particular industries and occupations (a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and (2) Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001 (the new Act) applies to the plant on this basis: (a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant’s opening adjustable value; and (b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and (c) if you excluded an amount from your assessable income under section 42‑290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999—the cost of the plant, and its opening adjustable value, are reduced by that amount; and (d) if subparagraph (1)(b)(ii) applies to you—you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi‑owner of the plant under the former Act continue. (3) If you were using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis: (a) for the diminishing value method—replace the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate you were using; and (i) replace the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate you were using; and (ii) increase the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note 1: Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced. > Note 2: Small business entities can choose to work out the decline in value of their depreciating assets under Division 328. (a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or (3) If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40‑70(1) or 40‑75(1) of the new Act that includes the plant’s effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and (2) For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets. (3) For a case where the plant is merged into another depreciating asset, section 40‑125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it. (b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and (a) you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and (b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU’s opening adjustable value. (1) Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001. (2) For a unit of software for which you were deducting amounts under Subdivision 46‑B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis: (d) you must use the same effective life you were using under Subdivision 46‑B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001. (1) This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day. (b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and (c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and (1) This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001. > Note: Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8). (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330‑80 of the former Act for your income year ending on 30 June 2001; and (c) in applying the formula in section 40‑75 of the new Act for the income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The remaining effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these: (i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and (ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (7) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and (b) the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of expenditure incurred in carrying on eligible quarrying operations—the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (i) you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day) after 30 June 2001; or (ii) the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day) after 30 June 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which the start day occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year. there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (1) This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330‑H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and (c) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (i) any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset); (i) any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (4) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (4) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (b) the expenditure would have been transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330‑H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for your income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (1) Despite subsections 40‑35(5), 40‑38(5) and 40‑40(4), there is no additional decline in the value of the notional asset referred to in those subsections if: (a) apart from this section, subsection 40‑35(5), 40‑38(5) or 40‑40(4) would apply because the real asset referred to in that subsection is disposed of; and (a) at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373‑35 of the former Act; and (b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day. (a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and (1) Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time). (2) Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time. (a) you have deducted or can deduct an amount under Subdivision 387‑G of the former Act for an amount (the qualifying amount) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and (b) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and (1) This section applies to you if you have deducted or can deduct an amount under Subdivision 400‑A of the former Act for an amount (the qualifying amount) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400‑A of the former Act. (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and (c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400‑15(3) of the former Act; and (1) Units of plant that you had allocated to a pool under Subdivision 42‑L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act. (a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and (c) in applying the formula in section 40‑70 of the new Act for your income year in which 1 July 2001 occurs—it has a base value equal to that opening adjustable value; and (d) you replace the component in the formula in subsection 40‑70(1) of the new Act that includes an asset’s effective life with the pool percentage you were using for the pool; and (e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40‑115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and (f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset. (3) An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item). > Note 1: You work out the decline in value of an item removed under this subsection under Subdivision 40‑B of the new Act, using the cost for it worked out under section 40‑205 of the new Act. (b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset. (2) The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year) in this way: (a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and (b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section. (a) for a unit of plant (including IRUs and expenditure on software that is not pooled)—its undeducted cost at the end of 30 June 2001; or (b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence—the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or (c) for transport capital expenditure—the entity’s amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or (d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (e) for expenditure on evaluating the impact on the environment of a project—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (f) for assets that were pooled under Subdivision 42‑M or 42‑L of the former Act—the closing balance of the pool at the end of 30 June 2001. (4) The asset’s base value for applying the formula in section 40‑70 of the new Act for the diminishing value method is that opening adjustable value. (5) The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an item of plant for which you were using the prime cost method—using the rules in section 40‑10 of this Act; and (c) for a unit of software for which the entity was deducting amounts under Subdivision 46‑B of the former Act—using the rules in subsection 40‑25(2) of this Act; and (f) for an amount of expenditure on evaluating the impact on the environment of a project—using the rules in section 40‑55 of this Act. (6) The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an amount of unrecouped expenditure under Division 330 of the former Act—using the rules in section 40‑35 of this Act; and (b) for an amount of transport capital expenditure under Division 330 of the former Act—using the rules in section 40‑40 of this Act; and (7) The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act. (a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑C of the former Act; or (b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑H of the former Act; or (c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387‑B of the former Act; or (d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; or (e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365. (9) The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001. (10) You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount). (11) You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount. (1) Subsections 40‑65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened: (b) you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act. (a) paragraph 40‑65(6)(a) of the Income Tax Assessment Act 1997 included both events set out in subsection (1) of this section; and (b) subsections 40‑65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events. (1) A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936. (2) An amount you have deducted or can deduct for a water facility under Subdivision 387‑B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40‑F of the new Act. (3) A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936. (a) you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40‑115 (about splitting a depreciating asset) or 40‑125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and (b) it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40‑72 of that Act; (2) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if: (c) it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40‑72 of that Act. (3) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset) before 10 May 2006 if: (b) the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and (d) it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40‑72 of that Act. (a) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you: (b) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001. (2) If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act. (3) Otherwise, Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section. (a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or (b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or (ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life. (1) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001. > Note: If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40\. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997. (1A) Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001. (1B) Subsection (1) applies to a mining, quarrying or prospecting right (the new right) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if: (i) the other company is a member of the same wholly‑owned group as the original holder and was a member of that group just before that day; and (ii) the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer. (1D) Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if: (b) the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001. (a) you acquired, under an interest realignment arrangement, an interest (a new interest) in a mining, quarrying or prospecting right; and (b) the interest was acquired in exchange for one or more other interests (old interests) in other mining, quarrying or prospecting rights; and Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001. (a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or (b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership; the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act. (3) An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that: (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act. (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act. (6) Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243. (7) An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if: (a) you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and (8) The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section. (c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act. (2) Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001. A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act. if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011. (2) The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011. (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset for an income year is the amount worked out under section 40‑130 if: (a) the income year is the year in which you start to use the asset, or have it installed ready for use, for a taxable purpose; and (b) subsection (2) (about businesses with turnover less than $500 million) applies to you for the year and for the income year in which you started to hold the asset (if that was an earlier year); and > Note 1: An effect of paragraph (1)(a) is that this Subdivision only applies to one income year per asset. See also subsection 40‑135(1). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $500 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. Exception—assets for which the decline in value is worked out under section 40‑82 or Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (3) However, this section does not apply to a depreciating asset for an income year if you work out the decline in value of the asset for the income year under any of the following: (1) For the purposes of paragraph 40‑120(1)(c) and section 328‑182, you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you: > Note: Section 328‑182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997. (i) entering into a contract under which you hold the post‑12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑12 March 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post‑12 March 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (8) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (9) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (10) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (1) For the purposes of section 40‑120, the decline in value for the income year in which paragraph 40‑120(1)(a) is satisfied (the current year) is: > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 12 March 2020 to 30 June 2020 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2020 to 30 June 2021. (a) 50% of the asset’s cost as at the end of the current year, disregarding any amount included in the second element of the asset’s cost after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997, assuming its cost were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (3) However, the amount worked out under subsection (2) for an income year cannot be more than the amount that is the asset’s cost for the year. (a) 50% of the sum of the asset’s opening adjustable value for the current year and any amount included in the second element of its cost for that year, disregarding any amount included in that second element after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997 assuming: (ii) for the prime cost method—the component “Asset’s \*cost” in the formula in subsection 40‑75(1) of that Act (as adjusted under that section) were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (b) for the prime cost method—the sum of its opening adjustable value for the income year and any amount included in the second element of its cost for that year. (1) The decline in value of a depreciating asset is not worked out under this Subdivision for an income year if this Subdivision already applied in working out the decline in value of the asset for an income year. (2) For an income year later than the year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (3) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (4) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) You may choose that the decline in value of a particular depreciating asset for an income year, and subsequent income years, is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the first income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. If this Subdivision applies to work out the decline in value of a depreciating asset you hold for an income year, no other provision of this Act or the Income Tax Assessment Act 1997 applies to work out that decline in value. (1) For the purposes of this Subdivision, you are covered by this section for a depreciating asset if, on or before 30 June 2023: (2) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (3) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or Exception—assets for which the decline in value is worked out under Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (a) the asset is allocated to a low‑value pool, or expenditure on the asset is allocated to a software development pool (see Subdivision 40‑E of the Income Tax Assessment Act 1997); or (b) you or another taxpayer has deducted or can deduct amounts for the asset under Subdivision 40‑F of the Income Tax Assessment Act 1997 (about primary production depreciating assets). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $5 billion; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this section. (ii) if the 2019‑20 income year ends on or before 6 October 2020—the sum of your ordinary income (if any) and statutory income (if any) for the 2019‑20 income year; and (c) the sum of the amounts worked out under subsection (3) for the 2016‑17, 2017‑18 and 2018‑19 income years exceeds $100 million. (b) next, work out the cost of each of those assets (including any amounts included in the second element of the asset’s cost at a time that is in the income year); (4) For the purposes of subsection (3), disregard an asset if, at the time you first used the asset, or had it installed ready for use, for a taxable purpose: (a) it was not reasonable to conclude that you would use the asset principally in Australia for the principal purpose of carrying on a business; or (5) For the purposes of paragraph (3)(b), to work out the cost of a depreciating asset that is capital works (see section 43‑20 of the Income Tax Assessment Act 1997): (a) disregard section 40‑45 of that Act and work out the cost of the capital works using Subdivision 40‑C of that Act; and (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under subsection (3) if: (a) where section 40‑155 covers you for the current year (regardless whether section 40‑157 also covers you for the current year)—an exclusion applies to you and the asset for the current year under section 40‑165 (about exclusions for businesses with turnover of $50 million or more); or (ii) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s start time occurs in the current year—the asset’s cost as at the end of the current year, disregarding any amount included in the asset’s cost after 30 June 2023; or (b) if the asset’s start time occurred in an earlier year—the sum of its opening adjustable value for the current year and any amount included in the second element of its cost for the current year, disregarding any amount included in the asset’s cost after 30 June 2023. > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 6 October 2020 to 30 June 2021 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2021 to 30 June 2022. (a) where paragraph 40‑160(2)(a) applies—section 40‑155 would not cover you for the income year if the reference in that section to $5 billion were instead a reference to $50 million; and (i) entering into a contract under which you hold the post‑6 October 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑6 October 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of satisfying paragraph 40‑160(1)(a) for the post‑6 October 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you already satisfied paragraph 40‑160(1)(a) of this Act for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (9) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (1) For the purposes of subsections 40‑160(2) and 40‑170(1A), an exclusion applies to you and an asset for an income year if any of the exclusions in this section applies in relation to the asset. (4) This exclusion applies in relation to the asset if the asset is available for use, at any time in the income year, by any of the following: (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under this section if: (ii) you started to use the asset, or have it installed ready for use, for a taxable purpose in an earlier income year; and (b) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under section 40‑82 of the Income Tax Assessment Act 1997—the amount worked out under subsection (3); or (b) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under Subdivision 40‑BA of this Act—the amount worked out under subsection (4); or Assets affected by section 40‑82 of the Income Tax Assessment Act 1997 (about assets costing less than $150,000, medium sized businesses) (a) the amount that would be the asset’s decline in value for the year under section 40‑82 of the Income Tax Assessment Act 1997, assuming the reference in subparagraph 40‑82(3A)(b)(ii) of that Act to 31 December 2020 were instead a reference to the 2020 budget time; and (a) the amount that would be worked out under paragraph 40‑130(2)(a) or (4)(a) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(a) and (4)(a) to 30 June 2021 were instead references to the 2020 budget time; and (c) the amount that would be worked out under paragraph 40‑130(2)(b) or (4)(b) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(b) and (4)(b) to “the amount worked out under paragraph (a)” were instead references to “the amounts worked out under paragraphs 40‑170(4)(a) and (b)”. (a) the amount that would be the asset’s decline in value for the year under Division 40 of the Income Tax Assessment Act 1997, disregarding any amounts included in the eligible second element worked out under section 40‑175 of this Act for the asset for the year; and The amount worked out under this section (the eligible second element) for a depreciating asset for an income year is the sum of any amounts included in the second element of the asset’s cost at a time that is in both of the following periods: (1) For an income year later than a year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (2) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (3) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) This section applies if the decline in value for a depreciating asset for an income year is worked out under this Subdivision, and at a time (the balancing adjustment time) in a later income year: (i) it becomes not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (b) none of the requirements in paragraphs 40‑295(1)(a), (b) or (c) of the Income Tax Assessment Act 1997 are satisfied in relation to the asset. (2) For the purposes of Subdivision 40‑D of the Income Tax Assessment Act 1997 assume that, at the balancing adjustment time, you stop using the asset, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again. (3) For the purposes of section 40‑180 of the Income Tax Assessment Act 1997 assume that the reference in item 3 of the table in subsection 40‑180(2) of that Act to “because you stop using it for any purpose expecting never to use it again” were instead a reference to “because of section 40‑185 of the Income Tax (Transitional Provisions) Act 1997”. (4) If a balancing adjustment event happens to a depreciating asset you hold because of this section, this Subdivision cannot apply to work out the decline in value of the asset for a later income year. (1) You may choose that the decline in value of a particular depreciating asset for an income year is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year. (1) Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40. (a) you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset: (ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and (4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day. (5) The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if: (i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or (ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and  > sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose. (7) Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens: (a) if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b). (i) an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and (ii) the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and (3) The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount. (a) on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and (c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and (ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal; (2) There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal. (3) Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount. If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997. (a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and (b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and: (i) the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, the R&D entity is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—a clawback amount under section 355‑447 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑466 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. (b) section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions. > Note 2: The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and: (i) the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset; (ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, an R&D entity (the partner) that is a partner in the R&D partnership and is entitled to one or more new law deductions for one or more income years for the asset, is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—a clawback amount under section 355‑449 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑468 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s new law deductions mentioned in paragraph (2)(b) of this section. (4) Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event. > Note: Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions. (1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant. (b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and (3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it. (a) there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and (b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act. (2) The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor. (3) The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and <table cellspacing="0" cellpadding="0" style="width:364.2pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:353.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading" style="page-break-inside:avoid"><span>Conditions for small business taxpayers retaining accelerated rates</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Condition</span></p></td></tr></thead><tbody><tr><td style="width:21.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:321.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>The transferee must have been a small business taxpayer for the income year (the </span><span style="font-weight:bold; font-style:italic">start year</span><span>) that includes the time when the entity first used the plant, or first had it installed ready for use.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>2</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>At that time, neither of these applies:</span></p><p class="Tablea"><span>(a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;</span></p><p class="Tablea"><span>(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection</span><span> </span><span>(5).</span></p></td></tr></tbody></table> ``` (4) For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership. (5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement. (a) for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or (i) replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and (ii) increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).  (b) if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11). (c) that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and (d) that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and (e) that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity. (a) for taxable supplies (if any) the entity makes during the year in the course of carrying on a business—the value (as defined by section 9‑75 of the GST Act) of the supplies; and (b) for other supplies the entity makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies. (1) The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for: (a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (c) for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or (d) for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant. (3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115. (4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain. (5) Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee. (i) the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or (a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and (1) A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act. (2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year. For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if: Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act. (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset): and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply. (i) for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or (ii) for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and (c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act. (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and (2) Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act. The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under: (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on: (2) You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act. (3) A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under: (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and (2) Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act. A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act. The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001. If: (d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act; (a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and (a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and (b) the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and (c) paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997. Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years. (1) For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section. (b) the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (b) that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (1) There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea" style="page-break-after:avoid"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a); and</span></p><p class="Tablea" style="page-break-after:avoid"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (b) disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (f) an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division. (4) If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45‑5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest. (5) If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45‑10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest. Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Disregard the use of the following amounts in determining (for the purposes of Subdivision 50‑A of the Income Tax Assessment Act 1997 whether a fund established before 1 July 1997 operates and pursues its purposes in Australia: Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years. (2) However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date. Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if: (b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time. Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years. 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years (1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act. <table cellspacing="0" cellpadding="0" style="margin-left:56.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:258.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Application provisions for specific sections</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-size:9pt; font-weight:bold">Item</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">This section of the </span><span style="font-size:9pt; font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-size:9pt; font-weight:bold"> ...</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">Applies as described in this provision of this Act ...</span></p></td></tr></thead><tbody><tr><td style="width:24.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55(1)</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>95</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>8</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td></tr></tbody></table> ``` (a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and (b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997. > Note: Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year. (b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997; sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997). > Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock. (3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997. (a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and (b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936; > Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal. #### 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997. (1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year. (2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936. (3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year: (a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners; (b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed. > Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year. > Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year. (b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year; the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year. (2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. (3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2). #### 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997. #### 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business (1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. (2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity. > Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997. (1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. (2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value. > Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997. #### 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year. (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. > Note: Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. > Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given). (5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act). (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment. > Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%. (5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%. (6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.  > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section. (b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4). Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age. Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later. Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies. Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3. (4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997. (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%. > Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986. (5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D. > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. (a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and (b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year). (3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and (2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual: (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income. > Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F. > Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997. > Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997. #### 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 (1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012. (2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies. (3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act. (b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009. (2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if: (i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest; (iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or (i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest; (iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009. (2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time. (4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2): (a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and (b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being: (ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and (c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and (d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if: (i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or (ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and (e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and (i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and (ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and (g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest. (a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced: (i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or (ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and (b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5. (2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right. (3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right. (2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. (3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section. Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years. (1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision. > Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision). > Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936). > Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997. (a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936. (1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936. (2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997. > Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997. (3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and (d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; (f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time. > Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and (d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015. (a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or (4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if: (b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset. The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year. (a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and (1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied: (b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and (d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works). (3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936. Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936. (b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006. (2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement. > Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement. Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual: (b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her. 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act (1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee). (2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year: (3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection. #### 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997. Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936). (2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if: (a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; (a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011); (b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986. > Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section. If: (a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and (b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936; Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995. (1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997. (2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997. (3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997. (4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997. > Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one. Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year: (a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and (b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year; the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation. Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset. (b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section); > Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply. (1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if: (a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and (2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value. (4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value. (a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997. (2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less. (1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936: (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. (1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if: (2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by: (a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or (a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or (2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period. Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year: If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997. (1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002. (2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset. (3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required. (i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and (ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and (c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and (f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997). (a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or (1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:  > total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part. (a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or (2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section. (3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1). (1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences. > Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997. (c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets). (4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act. (5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act. Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement. (a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and (2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time. (a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and (ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs. (2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer. (a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and (b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest; (2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event. (3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly. (4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly. <table cellspacing="0" cellpadding="0" style="width:362.55pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:351.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Creating a CGT asset</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">CGT event number</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Applicable amount</span></p></td></tr></thead><tbody><tr><td style="width:50.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D1</span></p></td><td style="width:290.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the incidental costs the originating company incurred that relate to the CGT event</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D2</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the option</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D3</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the right</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>F1</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred on the grant, renewal or extension of the lease</span></p></td></tr></tbody></table> ``` (5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day. A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision. (a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996. (b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. (b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend. (3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities. (1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company. (2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred. (3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company. (1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of: (2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of: (3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note. (1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised. (b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and (ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act. You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and (b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996. (c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and (c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over. (3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. (a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and (c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and (d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act. (3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division. Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years. A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: (1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day. (2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice. (a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and (b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and (a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and (b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and (c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group. (5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004. (6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection. (1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss): (b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions); and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time: (i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or (e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and (f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and (ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred; (2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if: (a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these: (i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset; (ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and (3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act. (a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and (b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section. (5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of: (a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and (b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset. Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. (ii) that could have been deducted, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the deduction had not been limited by the company’s income for that income year; and (ii) that could have been applied, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the application of the loss had not been limited by the company’s capital gains for that income year. 170‑C Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred #### 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years. #### 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). #### Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997. Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997. If: (a) all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (d) that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and (e) the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place. Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years. > introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament. Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day. #### Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting #### 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B. (1) The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day. (2) No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted. #### 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting (1) Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if: (a) the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and (b) none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount. (2) No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount. (1) This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account. (2) For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. > Note 2: If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60. (3) For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)). (4) For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. (5) The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if: (a) during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and (b) the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section. (a) the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and (b) during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components. (7) For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. (8) Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it: (b) the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component. (9) Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component. (10) For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002: (b) lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination; (c) a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination); (e) the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination); (f) the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination). Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period: 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows: (a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and (i) in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and (ii) in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. > Note: A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002. #### 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002: (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:23.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:87.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A franking surplus</span></p></td><td style="width:220.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.009.png" width="175" height="58" alt="Start formula Amount of the class A franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.010.png" width="190" height="56" alt="Start formula Amount of the class B franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.011.png" width="190" height="56" alt="Start formula Amount of the class C franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` #### 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus): (a) a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Original surplus</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:85.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>class A</span></p></td><td style="width:220.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.012.png" width="169" height="38" alt="Start formula Amount of the original class A surplus times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.013.png" width="169" height="38" alt="Start formula Amount of the original class B surplus times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.014.png" width="169" height="38" alt="Start formula Amount of the original class C surplus times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (4) If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit): (a) a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company. (5) The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking deficit into 1997 Act franking debit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Original deficit</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking debit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(4)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:70.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A</span></p></td><td style="width:235.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.015.png" width="164" height="38" alt="Start formula Amount of the original class A deficit times start fraction 39 over 61 end fraction end formula "></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.016.png" width="164" height="38" alt="Start formula Amount of the original class B deficit times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.017.png" width="164" height="38" alt="Start formula Amount of the original class C deficit times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (2) A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if: (c) the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions. (3) The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if: (b) the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and (1) While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit. (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year. (3) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: > Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act. (1) The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account. (a) a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time; (3) If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if: (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity. #### 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If: the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time. (1) Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections. (2) If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year. Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year. Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year. (5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in: that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement. (6) The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (7) The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (2) The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (3) The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (i) are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and (a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and (b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section. (a) whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and (1) This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002. (a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and (3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded. (1) This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002; (2) If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (3) If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (4) If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. (5) If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows: (a) any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and (i) in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and (ii) in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. #### 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF.  #### 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act). (2) If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus): (a) a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF. (4) If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit): (a) a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF. This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period). (1) The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period: (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (1) The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period. (2) The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner. (3) The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5. (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and (d) the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner; the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received. (3) A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time: (1) A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends. (2) However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period. (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (a) the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed: (d) the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and (e) the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return. (2) The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day. (1) The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period. (2) The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made. Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period. (b) on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax); the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed: (c) the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and (d) the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return. (2) The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day. The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period: If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day. If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and If: (a) a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and (b) the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment; In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment. If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment. The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with. If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953. (1) Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period. (a) the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and (b) the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3); the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on: (c) if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or If: Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax. Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division. If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997. (a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day: (3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002. (a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002: > Note: As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date. (b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997. In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003. (1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year. (a) a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of: (i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time; (iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period; (2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if: (b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time: (ii) the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. > Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. > Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. (7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table: <table cellspacing="0" cellpadding="0" style="width:365.35pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount of the franking credit and the exempting debit</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">If:</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the credit and debit is:</span></p></td></tr></thead><tbody><tr><td style="width:22.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The period starts immediately after 7.30</span><span> </span><span>pm by legal time in the Australian Capital Territory on 13</span><span> </span><span>May 1997</span></p></td><td style="width:141.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Both these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was not in surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>All these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was in surplus at the start of the period;</span></p><p class="Tablea"><span>(c) the surplus in the account at the switch time is greater than the surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the franking surplus in the Australian company’s franking account at the switch time; and</span></p><p class="Tablea"><span>(b) the franking surplus in the Australian company’s franking account at the start of the period</span></p></td></tr></tbody></table> ``` (a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and (b) the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period. Subdivision 235‑I of the Income Tax Assessment Act 1997 applies to assets acquired by the trustee of an instalment trust in: (1) Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years. (2) However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time). (3) The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997. Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997. (2) Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in: (1) Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that: (b) is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose. (a) if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007. > Note: To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997. (b) contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option; the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option. (3) For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5). (4) If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is: (a) the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less (b) the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest. (5) If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is: (6) If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil. (1) If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one. (2) If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year. (3) If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year. (a) for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and (b) for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year: Step 1. Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. Step 2. Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3). Step 3. If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year. > Note: Example: Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75): (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred: (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times: (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate. Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008. (a) the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and (b) the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities: (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (i) the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or (ii) the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and (f) none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made: (i) Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event; (ii) a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year. (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (b) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (c) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year #### 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year (a) the requirements set out in paragraphs 275‑610(1)(a), (b) and (c) of the Income Tax Assessment Act 1997 are satisfied in respect of an amount of non‑arm’s length income of a managed investment trust in relation to an income year; and (b) the managed investment trust became a party to the scheme mentioned in paragraph 275‑610(1)(a) of that Act before the day on which the Bill that became the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 was introduced into the House of Representatives; and Division 276 of the Income Tax Assessment Act 1997 as inserted in that Act by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (the amending Act) applies as set out in subitem 1(1) of Schedule 8 to the amending Act. (b) if the trustee of the trust has made a choice for the purposes of paragraph 1(1)(b) of Schedule 8 to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016—the first income year starting on or after 1 July 2015; or (c) if the trustee of the trust has made a choice for the purposes of subparagraph 276‑10(1)(e)(i) of the Income Tax Assessment Act 1997 in respect of the 2016‑17 income year—that income year. (c) the trust is an AMIT for an income year (the discovery year) that is the starting income year or a later income year. (1) This section applies if the trust has an under or over of a character in the discovery year relating to the base year. (b) if, at a time, the trust sent its members distribution statements for an income year that is prior to the starting income year—assume that the trust sent those members AMMA statements for that income year at that time. (3) For the purposes of Division 276 of the Income Tax Assessment Act 1997, treat the under or over mentioned in subsection (1) as an under or over of the AMIT, in the discovery year relating to the base year, of the character mentioned in that subsection. (a) had the under or over mentioned in subsection (1) been discovered before the starting income year, this Act would have operated to produce a particular effect (the pre‑AMIT scheme effect) for the base year in relation to the amount or amounts reflected in the under or over; and 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT #### 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT (b) working out the amount (if any) of the entity’s capital gain under subsection 104‑70(4) of the Income Tax Assessment Act 1997. (3) For the purpose of working out the amount of the non‑assessable part mentioned in paragraph 104‑70(1)(b), treat the following provisions as being in operation at the time the payment was made: (b) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in paragraph (a). (4) Subsection (3) does not apply to the extent (if any) that the entity, in the income tax return that it lodged for the income year in which the payment was made, included the amount of the payment in its assessable income for that income year. (5) For the purposes of section 118‑20 of the Income Tax Assessment Act 1997, treat this section as being in Part 3‑1 of that Act. (2) The Commissioner cannot amend the entity’s assessment for the income year in which the payment was made in a particular way if: (b) the Commissioner could not amend the assessment in that way if the following provisions were in operation at the time the payment was made: (ii) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in subparagraph (i); and Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82‑10F). (2) The object of this section is to apply (with modifications) provisions limiting deductibility in respect of certain contributions made during the period that: (a) Subdivisions AA and AB of Division 3 of Part III of the Income Tax Assessment Act 1936, as in force just before they were repealed by the Superannuation Legislation Amendment (Simplification) Act 2007; (b) any other provision of the Income Tax Assessment Act 1936, or of any instrument made under that Act, to the extent that it relates to the operation of those Subdivisions; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of those Subdivisions. (b) the deduction limit mentioned in section 82AAC for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (c) the deduction limit mentioned in section 82AAT for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (d) Division 290 of the Income Tax Assessment Act 1997 did not apply to contributions made during the income year mentioned in paragraph (a). (2) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of a defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection and subsection (4), the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 5 September 2006; (b) the defined benefit interest mentioned in paragraph (2)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 5 September 2006, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (2)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (4) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of the defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection, the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 12 May 2009; (b) the defined benefit interest mentioned in paragraph (4)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 12 May 2009, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (4)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (1) The object of this section is to apply (with modifications) provisions relating to excess non‑concessional contributions tax in respect of certain contributions made during the period that: (b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision. (ea) in a case where paragraph 292‑95(1)(b) of that Act would have allowed the contribution mentioned in that paragraph to be made at a time within that period—that paragraph allowed the contribution to be made on or before 30 June 2007; and (f) paragraph 292‑95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and (fa) in a case where subsection 292‑100(2), (4), (7) or (8) of that Act would have allowed the contribution mentioned in that subsection to be made at a time within that period—that subsection allowed the contribution to be made on or before 30 June 2007; and (g) paragraph 292‑100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and (h) contributions made during that period that are covered under section 292‑100 of that Act reduce the person’s CGT cap amount for the 2007‑2008 financial year in accordance with subsection 292‑105(2) of that Act (and despite subsection (1) of that section); and (i) if the conditions in subsection (4) are satisfied—the person’s excess non‑concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and (b) the Commissioner gives the person a transitional release authority under subsection 292‑80A(2) in response to the application; and (c) the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292‑80B within 21 days after the date of the release authority; and (d) the superannuation provider pays the person the amount required under section 292‑80C in relation to the transitional release authority. (b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act). (6) The amount to be included in the first person’s amount of non‑concessional contributions under subparagraph (3)(b)(ii) is the sum of: (a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and (b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made. (c) under Division 295 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)), the contribution is included in the assessable income of the superannuation provider in relation to the superannuation plan to which the contribution is made; and (8) For the purposes of paragraph (7)(b), treat the person as an employee of the other entity if the person would be treated as an employee of the other entity under Division 290 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)). (1) A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007. (2) The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292‑80(3)(b)(i), the person would have excess non‑concessional contributions for the financial year mentioned in paragraph 292‑80(3)(a). (4) For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out: The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 21 days after the date of the release authority. (1) A superannuation provider that has been given a transitional release authority in accordance with section 292‑80B must pay to the person within 30 days after receiving the release authority the least of the following amounts: (a) if the person requests the provider in writing to pay a specified amount in relation to the release authority—that amount; (c) the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person in complying superannuation plans. > Note 1: Section 288‑95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection. > Note 2: Section 288‑100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority. > Note 3: For reporting obligations on the superannuation provider in these circumstances, see section 390‑65 in Schedule 1 to the Taxation Administration Act 1953. (2) The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person in complying superannuation plans. (3) Section 307‑125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section. (a) your non‑concessional contributions cap for the 2015‑2016 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsection 292‑85(7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 applies after the commencement of this section as if: (d) subsection 292‑85(6) of that Act as so amended had been applied (taking into account paragraph (c) of this subsection) for the purposes of working out your non‑concessional contributions cap for the 2016‑2017 financial year. (2) For the purposes of working out your non‑concessional contributions caps for the 2017‑2018 financial year and the 2018‑2019 financial year, if: (a) your non‑concessional contributions cap for the 2016‑2017 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsections 292‑85(6) and (7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 apply after the commencement of this section as if the amount worked out under subsection 292‑85(5) of that Act as so amended were $380,000. (3) To avoid doubt, this section does not affect your non‑concessional contributions cap for any financial year that ended before 1 July 2017. The tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your non‑concessional contributions (see section 292‑90 of the Income Tax Assessment Act 1997) for the financial year. (2) Subject to section 294‑55, the amendments of Division 294 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Treasury Laws Amendment (2017 Measures No. 2) Act 2017 apply on and after 1 July 2017. Despite sections 294‑30 and 294‑140 of the Income Tax Assessment Act 1997 (which are about when you have excess transfer balance), you do not have excess transfer balance in your transfer balance account on any day in the period of 6 months beginning on 1 July 2017 if: (a) the only transfer balance credits in the account in that period arose under item 1 of the table in subsection 294‑25(1) of that Act (which is about superannuation income streams you have just before 1 July 2017); and (b) the sum of those transfer balance credits exceeds your transfer balance cap, but is less than or equal to $1,700,000; and (c) at the end of the period, the sum of all the transfer balance debits arising in your transfer balance account equals or exceeds the amount of the excess from paragraph (b). (1) Despite subsection 294‑10(2), a transfer balance credit arises under item 4 of the table in subsection 294‑25(1) of the Income Tax Assessment Act 1997 only in relation to a borrowing that arises under a contract entered into on or after 1 July 2017. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2017 is treated as if it arose under a contract entered into before 1 July 2017 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) on 1 July 2017, a transfer balance debit arose in your transfer balance account under item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997; and (b) the sum of all the transfer balance credits that arise in your transfer balance account under item 1 of the table in subsection 294‑25(1) of that Act exceeds the amount that would, apart from this section, be the amount of that debit. (2) Despite column 2 of item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997, the amount of the transfer balance debit is instead equal to the sum worked out under paragraph (1)(b) of this section. 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain > The object of this Subdivision is to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the following legislative changes: (a) the introduction of a transfer balance cap (as a result of Schedule 1 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016); (b) the exclusion of transition to retirement income streams (and similar income streams) from being superannuation income streams in the retirement phase (as a result of Schedule 8 to that Act). (a) starting on the start of the day on which the Bill that became the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 was introduced into the House of Representatives; and (a) at the start of the pre‑commencement period, a CGT asset of a fund is a segregated current pension asset of the fund; and (i) at a time (the cessation time) in the pre‑commencement period, the asset ceases to be a segregated current pension asset of the fund; or (ii) at the start of 1 July 2017 (also the cessation time), the asset ceases to be a segregated current pension asset of the fund because it supports a superannuation income stream covered by subsection 307‑80(3) of the Income Tax Assessment Act 1997; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (b) the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year is greater than nil; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and #### 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑115(3)(a), the fund makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the fund’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Subsection 295‑390(1) of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). > 2016‑17 non‑exempt proportion means 1 minus the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year. #### 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset (i) the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997 in respect of the trust for the 2016‑17 income year; (ii) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year; and (d) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and #### 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑125(3)(a), the trust makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the trust’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Section 295‑400 of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). (a) unless paragraph (b) applies—1 minus the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997; or (b) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage worked out by subtracting the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year from 100%. This Subdivision applies to an entity that is the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust. For the purposes of this Subdivision, an asset is a 30 June 1988 asset of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust if the entity owned it at the end of 30 June 1988. > Note: Section 295‑90 of the Income Tax Assessment Act 1997 treats these assets as having been acquired on 30 June 1988. (1) The first element of the cost base of each 30 June 1988 asset of the entity’s is the greater of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). (2) The first element of the reduced cost base of each 30 June 1988 asset of the entity’s is the lesser of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). the market value of the asset as at the end of 30 June 1988 is the average of the highest and lowest trade prices for identical assets recorded on 30 June 1988 in whichever of the following markets is applicable: (d) if, on that date, there was a State capital city market (other than the Sydney market) that recorded a higher volume of trading than the Sydney market in identical assets—that State capital city market; (2) For the purposes of this section, an asset is taken to have been listed on an Australian stock exchange on 30 June 1988 if, and only if, on that day the asset had the status of having been granted official quotation by a securities exchange within the meaning of the former Securities Industry Act 1980 or the law of a State or Territory corresponding to that former Act. (b) at any time during the period commencing at the time when the shares were acquired and ending at the end of 30 June 1988, the company paid an amount that was not a dividend to the entity in respect of the shares; (b) at any time during the period commencing at the time when the interest or unit was acquired and ending at the end of 30 June 1988, the trustee of the trust paid an amount to the entity in respect of the interest or unit, being: (i) in a case where the entity was exempt from tax for the year of income in which the payment was made—an amount that, if the entity had not been exempt from tax, would not have been the entity’s assessable income; or the cost base to the entity of the interest or unit as at 30 June 1988 is reduced by so much of the amount as is not attributable to a deduction allowed under former Division 10C or 10D of the Income Tax Assessment Act 1936. (1) Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (2) and (3) of this section apply if an entity exercises rights or options as mentioned in that section to acquire: (b) the greater of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (b) the lesser of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (4) The payment referred to in subsection (2) or (3) can include giving property. To the extent that the payment does, use the market value of the property in working out the amount of the payment. (1) A notice given under subsection 82AAT(1A) or (1CB) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑170 of the Income Tax Assessment Act 1997. (2) A notice given under subsection 82AAT(1C) or (1CD) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑180 of the Income Tax Assessment Act 1997. (1) A proportion of the ordinary income and statutory income of a continuously complying fixed interest ADF of an income year that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).  > Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the income year. > Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the income year. (4) A choice for the purposes of the definition of reckoning time in subsection (5) must be made on or before the date of lodgment of the income tax return of the ADF for the income year to which the choice relates, or before a later day allowed by the Commissioner. > continuously complying fixed interest ADF, in relation to an income year (the current year), means a fund that is a fixed interest complying ADF in relation to each of the following years: > current 25 May balance, in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time: (b) subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 September 1989 is to be added to the balance; (b) a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that day, made a deposit with the ADF that consisted wholly or partly of the roll‑over (as defined in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 as in force on that day) of an eligible termination payment as so defined, being an eligible termination payment that included a concessional component (as so defined). > fixed interest complying ADF, in relation to a year of income, means a complying ADF where both of the following conditions are satisfied: (a) not less than 90% of the amount that, apart from this section, would be the assessable income of the ADF of the income year (other than non‑arm’s length income or amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997) consists of any one or more of the following: (ii) any profit arising on the disposal, redemption, cancellation or maturity of a CGT asset referred to in paragraph 295‑85(3)(b) of the Income Tax Assessment Act 1997; (iii) an amount included in assessable income under Division 16E of Part III of the Income Tax Assessment Act 1936 (or would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply); (ii) virtual PST life insurance policies (as defined in the Income Tax Assessment Act 1997) issued by a life insurance company. > original 25 May balance, in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988. > reckoning time, in relation to an ADF in relation to an income year, means the beginning of the income year, or such other time during the income year as the ADF chooses in accordance with subsection (4). (6) This section does not apply to an ADF in relation to an income year unless the whole of the benefit that would accrue to the ADF from the application of this section in relation to the income year has been, or can reasonably expected to be, passed on to eligible depositors. An election made by the trustee of a complying superannuation fund under subsection 279(4) of the Income Tax Assessment Act 1936 that had effect for the income year of the fund in which 30 June 2007 occurs continues to have effect as if it had been made under section 295‑465 of the Income Tax Assessment Act 1997. Subdivisions 295‑I (no‑TFN contributions) and 295‑J (Tax offset for no‑TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006‑2007 income year ends on a day (the end day) after 1 July 2007 as if: (b) the entity’s no‑TFN contributions income for the entity’s 2007‑2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007‑2008 income year if the contributions concerned had been made in the entity’s 2007‑2008 income year. (2) Division 301 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section because you are a member of the fund in the same way as it would apply if the payments were superannuation member benefits paid to you from a complying superannuation fund. For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. Subdivision 301‑F of the Income Tax Assessment Act 1997 applies in relation to income years starting on or after 1 July 2007. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to the following in respect of an income year that starts on or before 1 July 2021: (b) the amendments of the Income Tax Assessment (1997 Act) Regulations 2021 made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023. (a) a superannuation benefit (the trigger benefit) was paid to a person in the 2020‑21 income year or an earlier income year; and (c) the trigger benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; and (2) The Commissioner cannot amend an assessment on the basis that a superannuation benefit paid to the person is a superannuation income stream benefit because of the amendments made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 if: (iii) the superannuation benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (a) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (b) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. (1) The Minister may, by legislative instrument, make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions) that: (a) relate to the amendments or repeals made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023; and (2) Without limiting subsection (1), rules made under this section before the end of the period of 12 months starting on the day that Schedule commences may provide that provisions of that Schedule, or any other Act or instrument, have effect with any modifications prescribed by the rules. Those provisions then have effect as if they were so modified. (2) Division 302 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section after another person’s death, because the other person was a member of that fund, in the same way as it would apply if the payments were superannuation death benefits paid to you from a complying superannuation fund. For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if: (b) just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. (2) For the purposes of Subdivision 82‑B of Division 82, Division 302 and section 303‑5 of the Income Tax Assessment Act 1997, the definition of death benefits dependant in section 302‑195 of that Act applies as if paragraphs (a) and (b) of the definition were replaced with the following paragraphs: (a) a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008 or a person who was formerly such a spouse; or (b) a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008, who is aged less than 18. (ii) a superannuation guarantee payment, a small superannuation account payment, an unclaimed money payment, a superannuation co‑contribution benefit payment or a superannuation annuity payment. (2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you at a time in the period: (i) a condition of release specified in item 107A or 207AA of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; or (ii) a condition of release specified in item 109AA of the table in Schedule 2 to the Retirement Savings Accounts Regulations 1997. (1) This section applies to a superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with section 292‑80B. (2) The superannuation benefit is not assessable income and is not exempt income to the extent that it does not exceed the amount mentioned in subsection (3). (3) The amount is the amount of excess non‑concessional contributions stated in the release authority in accordance with paragraph 292‑80A(3)(a), reduced (but not below zero) by the amount of any superannuation benefit that was not assessable income and not exempt income under a previous operation of subsection (2) in relation to the release authority. (4) The superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3). (a) you have an interest in a FIF (within the meaning of Part XI of the Income Tax Assessment Act 1936, as in force just before the commencement of item 37 of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010) (the paying fund); and (b) Subdivision 305‑B of the Income Tax Assessment Act 1997 applies in relation to the paying fund (see section 305‑55 of that Act); and (c) the paying fund transfers an amount to a complying superannuation fund in respect of you during the deduction year; and (d) you choose under section 305‑80 of the Income Tax Assessment Act 1997 that the amount, or part of the amount, is to be treated as assessable income of the complying superannuation fund; and (e) immediately before the transfer happens, there is a post‑FIF abolition surplus (within the meaning of the Income Tax Assessment Act 1936) for the paying fund in relation to you; and For the purposes of the definition of specified roll‑over amount in the Income Tax Assessment Act 1997, treat the taxable component of a directed termination payment (within the meaning of section 82‑10F) as the element untaxed in the fund of a superannuation benefit that is a roll‑over superannuation benefit. (1) This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007. > Note: This section also applies to an income stream replacing an earlier one because of an involuntary roll‑over (see section 307‑127). (2) Despite subsection 307‑125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows: (a) first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007); (b) next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits. The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit. (3) Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened: (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day; (ba) the holder of the superannuation interest is aged 60 or above on 1 July 2007, if none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day. (a) treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and (b) work out the tax free component of the superannuation interest for the purposes of section 307‑125 of the Income Tax Assessment Act 1997 under subsections (6) and (6A). (i) an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and (ii) the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time; (b) next, work out the unused undeducted purchase price (within the meaning of paragraph (a) of the definition of that term in subsection 27A(1) of the Income Tax Assessment Act 1936 just before the commencement of this section, and disregarding paragraphs (b) and (c) of that definition) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007; (c) next, work out the pre‑July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this section) of the eligible termination payment. (a) at least one superannuation income stream benefit was paid from the superannuation income stream before 1 July 1994; or (b) section 27AAAA of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007) applied to the superannuation income stream just before 1 July 2007; (7) For the purposes of paragraph (6)(c), disregard the value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment. (8) If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as: (b) if 1 or more other events mentioned in subsection (3) happened before the commutation—the time just before the earliest of those events happens. (a) references in that section to the later income stream (in relation to a time, or event happening, before the payment of that involuntary roll‑over superannuation benefit) include references to the earlier income stream; and (b) references in that section to the superannuation interest supporting the later income stream (in relation to a time, or event happening, before the payment of that benefit) include references to the earlier interest. (1) This section applies for the purposes of working out the amount of your total superannuation balance just before 1 July 2017. (2) The transfer balance mentioned in paragraph 307‑230(1)(b) of the Income Tax Assessment Act 1997 just before 1 July 2017 is taken to be equal to: (a) the sum of the transfer balance credits (if any) in your transfer balance account just after the start of 1 July 2017; less (b) the sum of the transfer balance debits (if any) arising in your transfer balance account on 1 July 2017 under item 4 of the table in subsection 294‑80(1) of that Act (about payment splits). (1) Section 307‑231 of the Income Tax Assessment Act 1997 applies in relation to borrowings that arise under contracts entered into on or after 1 July 2018. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2018 is treated as if it arose under a contract entered into before 1 July 2018 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) treat a deduction made under former section 279 of the Income Tax Assessment Act 1936 as having been made under section 295‑465 of the Income Tax Assessment Act 1997 instead; and (b) treat a deduction made under former section 279B of the Income Tax Assessment Act 1936 as having been made under section 295‑470 of the Income Tax Assessment Act 1997 instead. If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007‑2008 income year is, despite subsection 307‑345(1), the total of: (b) the amount by which $140,000 exceeds the upper limit for the 2006‑2007 income year (worked out under section 159SG of that Act). Division 316 of the Income Tax Assessment Act 1997 applies in relation to demutualisations occurring on or after 1 July 2008. If: (a) any assets held by the benefit funds of a life insurance company that is a friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a complying superannuation fund; and (b) the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer; the transfer is disregarded for any purposes of the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936. (1) In working out the amount that a life insurance company can deduct, in respect of life insurance policies that are disability policies (other than continuous disability policies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income. (2) In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection (1) applies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company’s liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320‑85(4) of that Act. If: (2) If the life insurance company wishes to include a part of an approved asset in its virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑87(2) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society establishes a virtual PST in the 2000‑01 income year, the calculation of the transfer values of the company’s virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year. (1) Subsection (3) applies for the purposes of subparagraph (b)(i) of the definition of virtual PST life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 259 of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007. (2) Subsection (3) also applies for the purposes of subparagraph (b)(i) of the definition of complying superannuation/FHSA life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 47 of Schedule 7 to the First Home Saver Accounts (Consequential Amendments) Act 2008. (3) Treat an annuity as having been purchased out of a superannuation lump sum or an employment termination payment, if the annuity was purchased: (b) out of an eligible termination payment (within the meaning of the Income Tax Assessment Act 1997, as in force just before the commencement mentioned in subsection (1) of this section). (2) If the life insurance company wishes to include a part of an approved asset in its segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (a) a life insurance company had a liability before 1 July 2000 under a life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and (c) there is a transfer of the company’s assets to the segregated exempt assets to meet that liability or that part of the liability; (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑105(1) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320‑225 of the Income Tax Assessment Act 1997 in the 2000‑01 income year, the calculation of the transfer values of the company’s segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year. Section 322‑25 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Part VC of the Insurance Act 1973 after 17 October 2008. 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you > new Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force after the commencement of this section. > old Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. > STS taxpayer means an STS taxpayer within the meaning of Division 328 of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. #### 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years (1) This section applies for the purpose of working out whether you are a small business entity (other than because of subsection 328‑110(4) of the Income Tax Assessment Act 1997) for the 2007‑08 or 2008‑09 income year. (2) You work out your aggregated turnover for the 2005‑06 or 2006‑07 income year as if the amendments made by Schedule 1 to the Tax Laws Amendment (Small Business) Act 2007 had been in force in relation to that year. (a) your aggregated turnover for the 2005‑06 income year (worked out in accordance with subsection (2)) is $2 million or more; but (b) your STS group turnover for that year (worked out under Subdivision 328‑F of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section) is less than $2 million. (2) The following provisions apply as if you are a small business entity for the income year in which you are winding up the business: #### 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you (1) For the purpose of working out whether you are a small business entity for the 2007‑08, 2008‑09, 2009‑10 or 2010‑11 income year (each a relevant income year) for the purposes of a provision to which subsection (3) applies: (2) An entity (the first entity) controls a discretionary trust for a relevant income year if, for any of the 4 income years (a previous income year) before that year: (a) if the previous income year is before the 2007‑08 income year—the trustee of the trust made a distribution of $100,000 or more to the first entity, any of its affiliates, or the first entity and any of its affiliates; or (i) the trustee of the trust paid to, or applied for the benefit of, the first entity, any of the first entity’s affiliates, or the first entity and any of its affiliates, any of the income or capital of the trust; and (ii) the percentage (the control percentage) of the income or capital paid or applied is at least 40% of the total amount of income or capital paid or applied by the trustee for that year. (1) This section sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (2) This section also sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (3) Any ordinary income that, apart from paragraph 328‑105(1)(a) of the Income Tax Assessment Act 1997 (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have derived before the changeover year (while you were using the STS accounting method) and you have not included in your assessable income because you have not received it is included in your assessable income for the changeover year. (4) Any general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, that, apart from paragraph 328‑105(1)(b) of that Act (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have incurred before the changeover year (while you were using the STS accounting method) and that you have not deducted because you have not paid them can be deducted for the changeover year. (b) for any later income year for which you are a small business entity but only if you used the STS accounting method for the income year before that later year. > Note: Example: You are a small business entity for the 2007‑08 and 2008‑09 income years and you continue to use the STS accounting method for those years. You are not a small business entity for the 2009‑10 income year so you cannot continue to use the STS accounting method for that year. Because you cannot use the STS accounting method for the 2009‑10 income year, you will not be able to use it again for a later income year even if you are a small business entity for that later year. In sections 328‑115 and 328‑120, STS accounting method means the accounting method that was required by the Income Tax Assessment Act 1997 to be used by STS taxpayers for the 2004‑05 income year. (b) you made a choice under subsection 328‑175(3) of old Subdivision 328‑D in relation to a depreciating asset you use to carry on a primary production business and for which you could deduct amounts under Subdivision 40‑F or 40‑G of the Income Tax Assessment Act 1997. (2) In determining whether you can choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997 in an increased access year, disregard subsection 328‑175(10) of that Act. (3) In applying paragraph 328‑175(10)(b) of that Act for the purpose of determining whether you can choose to use that Subdivision in any income year after the increased access years, disregard: (4) Paragraph 328‑180(1)(b) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that paragraph to $1,000: (i) first used the asset, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (i) first used the asset, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (i) first used the asset, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, on or after 1 July 2023 and on or before 30 June 2026. (a) a reference in that paragraph to the end of the income year in which you start to use the asset, or have it installed ready for use, for a taxable purpose were a reference to the earlier of: if: (i) first used the asset, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021. (5) Paragraph 328‑180(2)(a) or (3)(a) of the Income Tax Assessment Act 1997 applies to an amount included in the second element of the cost of an asset as if a reference in that paragraph to $1,000: (5A) For the purposes of determining whether, under subsection 328‑180(2) of the Income Tax Assessment Act 1997, you can deduct, for an income year (the current year), the taxable purpose proportion of an amount included in the second element of the cost of an asset, disregard paragraph (b) of that subsection if: (2) For the purposes of determining whether subsection 328‑180(1) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (b) of that subsection (which sets a limit of $1,000 on the cost of the asset) if, in the period beginning at the 2020 budget time and ending on 30 June 2023, you: (3) For the purposes of determining whether subsection 328‑180(2) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (a) of that subsection (which sets a limit of $1,000 on the amount) if the amount is included in the second element of the cost of the asset at any time in the period beginning at the 2020 budget time and ending on 30 June 2023. (4) In applying paragraph 328‑180(3)(a) of the Income Tax Assessment Act 1997 to an asset, disregard an amount included in the second element of the cost of the asset if the amount is deducted under subsection 328‑180(2) of that Act, as modified by subsection (3) of this section. (5) Section 328‑210 of the Income Tax Assessment Act 1997 applies as if the words “less than $1,000 but” in subsection (1) were disregarded, in relation to a deduction for an income year that ends: Subsection 328‑190(2) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that subsection to 15% were a reference to 57.5% if you are covered by section 40‑125 for the asset (which is about backing business investment). (1) A depreciating asset of yours that had been allocated to your general STS pool is treated as being allocated to your general small business pool. (2) A depreciating asset of yours that had been allocated to your long life STS pool is treated as being allocated to your long life small business pool. (3) If you made a choice, under subsection 328‑185(5) of old Subdivision 328‑D, not to have a depreciating asset allocated to your long life STS pool, the choice has effect for the purposes of subsection 328‑185(5) of new Subdivision 328‑D. (1) This section applies if a depreciating asset of yours is treated as being allocated to your general small business pool or long life small business pool under section 328‑185. (2) The opening pool balance of your general small business pool or long life small business pool for the 2007‑08 income year is taken to be the closing pool balance of your general STS pool or long life STS pool, as the case requires, for the 2006‑07 income year, reduced or increased by any adjustment required under section 328‑225 of new Subdivision 328‑D (about change in the business use of an asset). (a) you were not an STS taxpayer for the 2006‑07 income year (because you stopped being an STS taxpayer before that time); but (b) you are a small business entity for the 2007‑08 income year or a later income year and you choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets for that income year; the opening pool balance of your general small business pool or long life small business pool includes the sum of the taxable purpose proportions of the adjustable values of depreciating assets allocated to the pool under subsection 328‑185(3) of new Subdivision 328‑D for that year. (1) This section applies for the purposes of applying Subdivision 328‑D of the Income Tax Assessment Act 1997 for the 2012‑13 income year and later income years. (2) A depreciating asset that had been allocated to your long life small business pool is treated as being allocated to your general small business pool. (a) the closing pool balance of your general small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under section 328‑225 of that Act; and (b) the closing pool balance of your long life small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under that section. (1) This section applies if you chose to stop being an STS taxpayer for the 2005‑06 income year or the 2006‑07 income year. (2) You cannot choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets until at least 5 years after the income year for which you chose to stop being an STS taxpayer. > Note: Subdivision 328‑D of the Income Tax Assessment Act 1997 continues to apply to depreciating assets that have been allocated to your small business pools even if you are not a small business entity, or do not choose to use that Subdivision, for an income year: see section 328‑220 of that Subdivision. (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct 20% of particular expenditure for your 2023‑24 income year if: (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (d) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑450 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (6) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (ii) if the provider is a registered body of a kind listed in paragraph (2)(b), (c) or (d)—the training is within the provider’s scope of registration for that kind of registered body; and (d) each enrolment, or arrangement, for the provision of the training is made or entered into at or after 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022; and > Note: Paragraphs (b) and (c) mean this section will not apply to expenditure for on‑the‑job training or training provided by you in house. (a) a registered higher education provider (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); (b) a NVR registered training organisation (within the meaning of the National Vocational Education and Training Regulator Act 2011); (c) a registered education and training organisation (within the meaning of the Education and Training Reform Act 2006 (Vic.)); (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct for your 2023‑24 income year an amount that is equal to the sum of: (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (3) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑460 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (4) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (b) you incur the expenditure in the period starting at 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022 and ending at the end of: (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (4) For the purposes of paragraphs (1)(c) and (2)(c), in working out whether you can deduct an amount of expenditure on a depreciating asset, assume that: (b) throughout that effective life, you will use the asset for a taxable purpose to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose. (a) 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑470(1) or (3) applies in relation to the income year; and > Note: The deduction relates to the period of 1 July 2023 to 30 June 2024. An entity may have deducted an amount under paragraph (a) for a previous income year if the entity has a substituted accounting period. (2) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑470 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (3) Sections 8‑10, 40‑215 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (c) you start to use the asset, or have it installed ready for use, for any purpose after 30 June 2023 but before 1 July 2024; and (d) you start to use the asset, or have it installed ready for use, for a taxable purpose at a time (the start time) that is: (e) you are a small business entity, or an entity covered by subsection (4), for the income year that includes the start time; and (h) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) a new reasonably comparable depreciating asset that uses a fossil fuel (other than a use of which that is merely incidental) is available in the market at the start time; (ii) if the asset is being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than the other asset; (iii) if the asset is not being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than a new reasonably comparable depreciating asset that is available in the market at the start time; or (i) a depreciating asset (other than an asset excluded under subsection (6)) that uses electricity, or energy that is generated from a renewable source, to be more energy efficient; (iv) the use of electricity, or energy that is generated from a renewable source, by another depreciating asset to be monitored. (a) the amount is included in the second element of a depreciating asset’s cost under paragraph 40‑190(2)(a) of the Income Tax Assessment Act 1997; and (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (d) you are a small business entity, or an entity covered by subsection (4), for the income year in which the expenditure is incurred; and (i) if the asset could use a fossil fuel (other than a use of which that is merely incidental)—the asset to only use electricity, or energy that is generated from a renewable source; (ii) if the asset uses electricity, or energy that is generated from a renewable source—the asset to be more energy efficient; (g) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) For the purposes of paragraph (1)(b) or (3)(b), in working out whether you can deduct an amount of expenditure assume that: (i) for the purposes of paragraph (1)(b)—to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose; or (ii) for the purposes of paragraph (3)(b)—to the same extent as you use it for a taxable purpose in the income year in which the expenditure is incurred. (b) expenditure (other than expenditure referred to in subparagraph (3)(e)(i)) on an asset that can use a fossil fuel (other than a use of which that is merely incidental); (c) an asset that solely or predominantly generates electricity from a renewable source (for example, photovoltaic cells) or expenditure on such an asset; (d) an asset, or expenditure, being capital works for which you can deduct an amount under Division 43 of the Income Tax Assessment Act 1997; > Note: Subsections (1) and (3) also do not apply to an item of trading stock because such an asset is not a depreciating asset: see section 40‑30 of the Income Tax Assessment Act 1997. A reference in each of the following provisions of the Income Tax Assessment Act 1997 to a registration under section 27A of the Industry Research and Development Act 1986 includes a reference to a registration under former section 39J of that Act: (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) the R&D entity cannot deduct an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from: (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D entity could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:22pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the R&D entity is taken to be able to deduct under subsection 355‑315(2) of the new Act that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the R&D entity’s assessable income for the event year under subsection 355‑315(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 for the asset, the R&D entity is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑446 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the R&D entity is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑465 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: Section 355‑315 of the new Act would otherwise apply for the event in a case where the R&D entity had new law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by an R&D partnership; and (i) the partner can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the partner chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D partnership could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the partner is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:21.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D entity</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D partnership</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the partner is taken to be able to deduct under subsection 355‑525(2) of the new Act the partner’s proportion of that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the partner’s assessable income for the event year under subsection 355‑525(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partner’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if one or more partners (including the partner) in the R&D partnership is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset, the partner is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑448 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the partner is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑467 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s deductions under section 355‑520 of the new Act mentioned in subsection (4A) of this section. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the partner for the event, do so apply to the partner for the event. > Note 1: Section 355‑525 of the new Act would otherwise apply for the event in a case where the partner had new law deductions. Item 7 of the table in subsection 57‑110(2) in Schedule 2D to the Income Tax Assessment Act 1936 applies as if the deduction rules set out in the final column of that item also included former sections 73BA and 73BH of the Income Tax Assessment Act 1936. For the purposes of step 1 of the method statement in subsection 355‑415(2) of the Income Tax Assessment Act 1997, also disregard amounts that have already been taken into account under former subsection 73B(14AA) of the Income Tax Assessment Act 1936 for the R&D entity, the grouped entity and the R&D activities for an earlier income year. (1) This section applies if, apart from former paragraph 73B(10)(a) of the Income Tax Assessment Act 1936, an eligible company could deduct advance R and D expenditure in one or more income years commencing on or after 1 July 2011. > Note: That deduction would be under former section 73B of that Act as that former section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (a) apart from Subdivision H (prepaid expenditure) of Division 3 of Part III of the Income Tax Assessment Act 1936, an eligible company can deduct an amount under former section 73B, 73BA, 73BH, 73QA, 73QB or 73Y of that Act for an income year commencing before 1 July 2011; and (c) apart from former paragraph 73B(10)(a) of that Act, the eligible company could deduct an amount, as a result of that application of that Subdivision, for an income year commencing on or after 1 July 2011. > Note: That deduction would be under that Act as it applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (3) Former paragraph 73B(10)(a) of that Act is taken to apply to those income years commencing on or after 1 July 2011 as if the reference in that former paragraph to section 39J of the Industry Research and Development Act 1986 were a reference to section 27A of that Act. (4) An expression used in this section that is also used in former section 73B of the Income Tax Assessment Act 1936 has the same meaning in this section as it has in that former section. This Subdivision applies to core technology (within the meaning of former section 73B of the Income Tax Assessment Act 1936) if: (a) you incurred core technology expenditure (within the meaning of that former section) in an income year commencing before 1 July 2011 in relation to the core technology under one or more contracts entered into at or after the time referred to in former subsection 73B(12) of that Act; and (b) that expenditure (the undeducted expenditure) cannot be deducted for the last income year commencing before 1 July 2011. (1) This section applies for the purposes of Division 40 of the Income Tax Assessment Act 1997, other than sections 40‑292 and 40‑293 of that Act, if the core technology (the asset) is a depreciating asset. (2) Disregard this section, including its effect on the amount you can deduct under section 40‑25 of that Act for the asset, for the purposes of working out: (3) The asset’s opening adjustable value for the first income year that commences on or after 1 July 2011 (the first new income year) is equal to the amount of the undeducted expenditure. (4) Subsection 40‑75(2) of the Income Tax Assessment Act 1997 applies to the asset as if the first new income year were a change year (within the meaning of that subsection). If the core technology is not a depreciating asset, you can deduct the undeducted expenditure in equal proportions over a period of 5 income years starting in the first income year commencing on or after 1 July 2011. To work out the film component (if any) of your tax loss for the 1997‑98 income year or a later income year, apply former section 375‑805 of the Income Tax Assessment Act 1997. If you incurred a film loss for the purposes of former section 79F (Film losses of 1989‑90 to 1996‑97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989‑90 to 1996‑97 income years, that film loss is the film component of your tax loss for that income year. (1) To work out your film loss (if any) for the purposes of the Income Tax Assessment Act 1997 for the 1989‑90 or a later income year, apply former section 375‑810 of that Act. (2) You can deduct in the 1997‑98 or a later income year your film loss for any of the 1989‑90 to 1996‑97 income years only to the extent that it has not already been deducted. (1) Division 392 of the Income Tax Assessment Act 1997 applies to assessments for the 1998‑99 income year and later income years. (a) it had applied to your assessment for each income year before the 1998‑99 income year for which Division 16 of Part III of the Income Tax Assessment Act 1936 applied in relation to your income; and (b) you had carried on a primary production business during each income year before the 1998‑99 income year when you carried on a business of primary production; and (c) for each income year before the 1998‑99 income year you had a basic taxable income equal to your taxable income for the income year for the purposes of Division 16 of Part III of the Income Tax Assessment Act 1936. > Note: Section 149A of the Income Tax Assessment Act 1936 identifies what your taxable income for an income year is for the purposes of Division 16 of Part III of that Act. Division 392 of the Income Tax Assessment Act 1997 does not apply to your assessment for the 1998‑99 income year or a later income year if you made an election under section 158A (Election that Division not apply) of the Income Tax Assessment Act 1936 relating to an income year before the 1998‑99 income year. 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 A reference in Division 393 of the Income Tax Assessment Act 1997 to a deduction under section 393‑5 of that Act for making a farm management deposit is taken to include a reference to a deduction under section 393‑10 in Schedule 2G to the Income Tax Assessment Act 1936, as in force just before the commencement of this section, if the deposit was made before the 2010‑11 income year. #### 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 (b) the deposit was made with an FMD provider as a result of a request to which section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, applied; the unrecouped FMD deduction in respect of the deposit at that time is equal to the amount of the unrecouped deduction (within the meaning of the former subsection 159GA(3) of the Income Tax Assessment Act 1936) in respect of the deposit immediately before it ceased to be a deposit under the Loan (Income Equalization Deposits) Act 1976. > Note: This means that the unrecouped deduction relating to the deposit under the Loan (Income Equalization Deposits) Act 1976 continues to apply (by becoming an unrecouped FMD deduction) when the deposit is transferred to an FMD provider as a farm management deposit. The Loan (Income Equalization Deposits) Act 1976 was repealed on 22 February 2005. If a beneficiary of a trust was covered by paragraph (c) of the definition of primary producer in section 393‑25 in Schedule 2G to the Income Tax Assessment Act 1936 in the 2009‑10 income year, treat subsection 393‑25(3) of the Income Tax Assessment Act 1997 as having applied to the beneficiary for the purpose of determining the maximum number of choices that the trustee may make under subsection 393‑27(2) of that Act for the 2010‑11 income year. (a) a farm management deposit of an owner was unclaimed moneys for the purposes of section 69 of the Banking Act 1959; and (2) For the purpose of subsection 393‑10(1) of the Income Tax Assessment Act, treat the repaid unclaimed moneys as a repayment of the deposit of the owner. (3) To avoid doubt, the payment of unclaimed moneys to the Commonwealth under section 69 of the Banking Act 1959 is not a repayment of the deposit of the owner for the purposes of Division 393 of the Income Tax Assessment Act 1997. 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 #### 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 If a farm management deposit was made with an FMD provider as a result of a request under section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, then: (a) subsections 393‑40(1) to (4) of the Income Tax Assessment Act 1997 apply as if the day the deposit was made was the day on which the deposit was originally made under the Loan (Income Equalization Deposits) Act 1976; and (1) A copyright collecting society to which section 51‑43 of the Income Tax Assessment Act 1997 applies, may elect that, from 1 July 2004, the section apply to all ordinary income, and statutory income, collected or derived by the society on or after 1 July 2004. Division 420 of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division. Subdivision 615‑C of the Income Tax Assessment Act 1997 applies to you with the modifications set out in this Subdivision if you chose to obtain a roll‑over involving \*shares or units that: (b) were your trading stock, or revenue assets, at the time immediately before that disposal, redemption or cancellation. (1) Disregard subparagraph 615‑45(a)(ii), and paragraph 615‑45(b), of the Income Tax Assessment Act 1997 if the roll‑over relates to \*shares that were disposed of, redeemed or cancelled. (2) For each of the \*shares in the interposed company that you acquired in return for those of your shares or units in the original entity that were your \*trading stock at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  (2) For the purpose of calculating any profit or loss on a future disposal, cessation of ownership, or other realisation of a \*share in the interposed company that you acquired in return for those of your shares or units in the original entity that were \*revenue assets at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  Subdivision 620‑A of the Income Tax Assessment Act 1997 applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. (1) Part 3‑90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Act (No. 1) 2002 and amended by: (2) Section 713‑50 of the Income Tax Assessment Act 1997 (about factors to consider in determining destination of distribution by non‑fixed trust) applies for the purposes of this Part in the same way as it applies for the purposes of Part 3‑90 of that Act. ### Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly‑owned subsidiary of the entity (the future head company) that became the head company of the group; or (ii) at some time during that period, the entity was a wholly‑owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (ii) it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (1) If a group is a transitional group, its head company may, subject to subsection (3), choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (3) If the choice is to be made after the end of the period mentioned in paragraph (2)(a) and before the end of the day mentioned in paragraph (2)(b), it cannot be made unless each entity in relation to which the conditions in subsection (5) are satisfied has agreed to it being made. (a) the entity (the leaving entity) ceased to be a subsidiary member of the group before the choice was made (in a subsection (3) case) or before the revocation took place (in a subsection (4) case); and (b) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; and (c) the asset had become that of the head company because that section applied when a chosen transitional entity (whether or not the same entity as the leaving entity) became a subsidiary member. Section 716‑855 applies for the purposes of this Division in the same way as that section applies for the purposes of Part 3‑90 of the Income Tax Assessment Act 1997. is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705‑B of that Act and with this Division. 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity Section 701‑10 (cost to head company of assets of joining entity) and subsection 701‑35(4) (setting value of trading stock at tax‑neutral amount) of the Income Tax Assessment Act 1997 do not apply to the assets of a chosen transitional entity. > Note: The fact that the head company inherits the entity’s history under section 701‑5 of that Act when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time. #### 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities (2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non‑chosen subsidiary) is worked out in a special way. (b) for each sub‑group (see subsection (6)) that exists in relation to the non‑chosen subsidiary—the sub‑group’s notional allocable cost amount (see subsection(5)) for the non‑chosen subsidiary. (4) The head company adjusted allocable amount for the non‑chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if; (b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of head company’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub‑group in relation to the non‑chosen subsidiary. (5) For each sub‑group that exists in relation to the non‑chosen subsidiary, there is a sub‑group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non‑chosen subsidiary if: (a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non‑chosen subsidiary and the entities comprising the sub‑group; and (c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub‑group membership interests (see subsection (6)) in relation to the sub‑group, and any such entity held those membership interests during the period when it actually held them; and (d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of chosen transitional entity’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub‑group. (6) If a chosen transitional entity holds membership interests in a non‑chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non‑chosen subsidiary: (a) the chosen transitional entity and each interposed non‑chosen subsidiary comprise a sub‑group in relation to the non‑chosen subsidiary (unless the non‑chosen subsidiary is included in a sub‑group in relation to another non‑chosen subsidiary); and (i) the membership interests that the chosen transitional entity holds directly in the non‑chosen subsidiary or in any of the interposed non‑chosen subsidiaries; (ii) the membership interests that each interposed non‑chosen subsidiary holds directly in the non‑chosen subsidiary or in any of the other interposed non‑chosen subsidiaries. #### 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities If any provision of the Income Tax Assessment Act 1997 would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply. > Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred. (1) This section has effect for the purposes of applying section 705‑70 (step 2 of allocable cost amount) of the Income Tax Assessment Act 1997 in relation to a transitional entity. (2) In spite of subsection 705‑70(1A) of that Act, if the amount of an accounting liability of the transitional entity would be different when it becomes an accounting liability of the transitional group, that difference is not taken into account in working out the amount of the liability. #### 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different (a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset (the roll‑over asset) for which there was: (ii) roll‑over relief under section 40‑340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and (i) became an asset of the head company when the transitional group came into existence because subsection 701‑1(1) (the single entity rule) of that Act applies; or differs at that time from what it would have been if the act, transaction or event that gave rise to the CGT event had not occurred in relation to the roll‑over asset; then the provisions mentioned in subsection (2) apply as if the act, transaction or event had not occurred in relation to the roll‑over asset. (a) the act, transaction or event mentioned in subsection (1) happened before a demerger and in connection with the demerger; and (b) before the transitional group came into existence, at least one of the following entities ceased to be a member of the demerger group because of the demerger: (i) the originating company in relation to the roll‑over, or the transferor in relation to the roll‑over relief, was a foreign resident; and (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as a transitional foreign‑held subsidiary of the group. #### 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets (1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied. (2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset. (a) the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and (b) former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset. (4) The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group. (6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses. #### 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets (b) just before the transitional group came into existence, the entity that became the head company held a pre‑CGT asset; and (d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre‑CGT asset and is held by the head company only because the entity is taken by subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company. (2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence. #### 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity (1) This section provides for an addition to the step 1 amount for working out under section 711‑20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity) that ceases to be a subsidiary member of the transitional group at a time (the leaving time), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701‑1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount for paragraph</span><span> </span><span>(2)(c)</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">If, because of the circumstances described in paragraphs</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(a) and (b):</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">The amount is:</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:180.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following provisions applied to the entity:</span></p><p class="Tablea"><span>(a) former section</span><span> </span><span>61A of the </span><span style="font-style:italic">Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(b) former Subdivision</span><span> </span><span>57</span><span>‑</span><span>I in Schedule</span><span> </span><span>2D to the</span><span style="font-style:italic"> Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(c) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(4) of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td><td style="width:148.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the amount treated as being the cost of the asset under that provision; and</span></p><p class="Tablea"><span>(b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>2</span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following subsections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span><span> applied to the entity:</span></p><p class="Tablea"><span>(a) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(5);</span></p><p class="Tablea"><span>(b) 58</span><span>‑</span><span>70(3)</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The amount treated as being the cost, or the first element of the cost, of the asset under that subsection</span></p></td></tr></tbody></table> ``` (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997, as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="4" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amounts and provisions for different dates of acquisition</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Date of the acquisition</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Amount</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Provision of Division</span><span style="font-weight:bold"> </span><span style="font-weight:bold">58 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> applying to the acquisition and the working out of the amount</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:76.7pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>160</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>220</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>After 30</span><span> </span><span>June 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>First element of the cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subsection</span><span> </span><span>58</span><span>‑</span><span>70(5)</span></p></td></tr></tbody></table> ``` > Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. > Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and ### Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: #### 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70‑45 to 70‑70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420‑51 to 420‑58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (a) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority‑owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority‑owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority‑owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority‑owned entity became a subsidiary member of the group, there was roll‑over relief under section 40‑340 of the Income Tax Assessment Act 1997. (a) while the asset is, because subsection 701‑1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, its tax cost setting amount is taken to be equal to the continuing majority‑owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711‑30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997. (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset becomes that of an entity (a new asset holder) other than the head company because subsection 701‑1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder) acquiring some or all of the membership interests in the new asset holder; and (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset is acquired by another entity (a new asset holder) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll‑over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value asset just before the acquisition; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 #### 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 (b) members of the consolidated group or the MEC group mentioned in subsection 104‑500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701‑1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701‑1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (3) If this section applies, neither subsection 104‑500(4) nor subsection 104‑500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year. ### Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C‑B); and (b) modifies certain rules in Part 3‑90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C‑C). > Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719‑2 and 719‑10 of this Act). 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership #### 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(ii) of that Act (see subsection 719‑2(3) of this Act). (b) a trust (a non‑resident trust) that does not meet the requirements in any item of the table in section 703‑25 of the Income Tax Assessment Act 1997. (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non‑resident company or a non‑resident trust; or Test entity must be a subsidiary member on assumption that non‑resident companies and non‑resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non‑resident company or non‑resident trust were a subsidiary member of the group. (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv). #### 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(iii) of that Act (see subsection 719‑2(3) of this Act). (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C‑10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3). If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C‑10 are met; and (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (ii) an entity that is a transitional foreign‑held indirect subsidiary of the group because of another application of this paragraph; Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign‑held indirect subsidiary would need to have satisfied the set of requirements in either section 701C‑10 or 701C‑15 (1) This Subdivision applies if an entity (the transitional foreign‑held joining entity) that is a transitional foreign‑held subsidiary or a transitional foreign‑held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time) the group comes into existence. (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign‑held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign‑held indirect subsidiary that becomes a subsidiary member at that time takes account of this. (a) section 701‑10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); apply, for the purposes of setting the tax cost of an asset of the transitional foreign‑held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign‑held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. > Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign‑held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign‑held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign‑held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign‑held subsidiary and the other entity. > Note 2: If the transitional foreign‑held joining entity is a transitional foreign‑held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705‑A of the Income Tax Assessment Act 1997, in its application in accordance with Subdivision 705‑B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company. Subsection 701‑35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax‑neutral amount) does not apply to the assets of the transitional foreign‑held joining entity if it is a transitional foreign‑held subsidiary. Section 701‑15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: (a) this section applies to each membership interest in the transitional foreign‑held subsidiary that is held by an entity (an eligible non‑resident) of a kind mentioned in subparagraph 701C‑20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign‑held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701‑1(2) of the Income Tax Assessment Act 1997 applies to the eligible non‑resident in the same way as it applies to the head company. Section 711‑5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: > Note: If the leaving entity is a transitional foreign‑held subsidiary (within the meaning of section 701C‑20 of the Income Tax (Transitional Provisions) Act 1997), this Division will, in accordance with subsection 701‑15(4) of this Act (see section 701C‑40 of the first‑mentioned Act), apply to membership interests that an eligible non‑resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity. (1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707‑C of the Income Tax Assessment Act 1997. (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period. (1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if: (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (d) the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997. (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: (1) The head company of a consolidated group may make a choice in the approved form to apply section 701D‑10 to another entity. (2) However, the head company cannot make that choice if subsection 701D‑10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (a) an asset of the head company because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701‑55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40‑77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40‑77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40‑285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount. (b) after the asset became an asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). > Note: The final entity will be different from the head company if an entity (the leaving entity) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40‑285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. > Note: The final entity will be entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701‑5 (the entry history rule) of that Act and perhaps also section 701‑40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity) became a subsidiary member of the group; and It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). > Note: In some cases, section 705‑47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40‑285(3) of this Act. If: (b) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and subsection 40‑285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701‑10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997. > Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997. (1) For the purposes of Part 3‑90 of the Income Tax Assessment Act 1997, this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960‑G of that Act whether the interest or right is a membership interest of the entity in the other entity. > Note: Under Subdivision 960‑G of the Income Tax Assessment Act 1997, a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001) apply to transactions in relation to the interest or right at the relevant time. Despite the amendments of section 703‑35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) If an entity (the joining entity) to which section 40‑75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time), this Subdivision applies in relation to: (ii) became assets of the head company of the group at the joining time because of section 701‑1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure. (1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). (2) If the joining entity could not deduct an amount under Subdivision 40‑B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701‑55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40‑35, 40‑37, 40‑40 or 40‑43 treated the joining entity as holding a notional asset. > Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705‑30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. (a) deductions under former Subdivision 330‑A, 330‑C or 330‑H of the Income Tax Assessment Act 1997, or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated an entity as holding because of the expenditure. (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); > Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40‑75(4) of this Act, but may have been reset since under Subdivision 40‑B of the Income Tax Assessment Act 1997. > Note 2: The effective life of a notional asset is specified by whichever one of sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act is relevant to the notional asset. (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (9) Section 705‑55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705‑45 of that Act. > Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705‑40 of the Income Tax Assessment Act 1997. (a) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701‑5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. > Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705‑305(3). (ii) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707‑A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member. 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value #### 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707‑320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor) other than the real loss‑maker mentioned in subsection 707‑315(1) of that Act for the bundle; and (b) both the real loss‑maker and the value donor became members of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (ca) neither the real loss‑maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (ii) a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (ii) section 713‑540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (2) It must have been possible for the real loss‑maker to have transferred the loss to the value donor under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss‑maker at the initial transfer time the amount worked out using the formula:  > Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707‑327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss‑maker to the transferee. > total of real loss‑maker’s non‑foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss‑makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) included in a bundle of losses: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. #### 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value (1) This section affects the calculation of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707‑325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936, in the bundle). > Note: This section does not affect the calculation of the real loss‑maker’s modified market value for other purposes (such as the real loss‑maker being a value donor for the purposes of another application of section 707‑325 of this Act). (3) One condition is that the event was an injection of capital directly into the real loss‑maker by the value donor mentioned in section 707‑325 of this Act. (c) that would have caused subsection 707‑325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss‑maker’s modified market value (even if no other events described in subsection 707‑325(4) of that Act had occurred), apart from this section. (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss‑maker (whether or not the event also involved either the value donor or the real loss‑maker); or (1) This section has effect for the purposes of working out under Subdivision 707‑C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707‑325, as if there were added to the modified market value of the real loss‑maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (c) the loss is not a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707‑A of that Act at the initial transfer time had the company: > Note: This section has effect even if the amount added to the real loss‑maker’s modified market value under section 707‑325 is nil because the value donor’s modified market value is nil. (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707‑325, as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (4) If the transferee mentioned in subsection 707‑325(1) chooses, sections 707‑310, 707‑335 (except paragraph 707‑335(2)(a)) and 707‑340 of the Income Tax Assessment Act 1997 (and subsections 707‑315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: > Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707‑325(1)(d) and (e) and subsection 707‑325(2) in an application of section 707‑325 separate from the application of that section mentioned in paragraph (1)(a) of this section. > Note: This means that a loss that provided a basis for section 707‑325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. (b) in connection with the requirement that it must have been possible for a company (the notional transferor) to transfer to another company (the notional transferee) for an income year a loss under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997. (b) ends immediately after the initial transfer time mentioned in subsection 707‑320(1) of the Income Tax Assessment Act 1997. > Note: For the purposes of identifying the trial year using the definition in section 707‑120 of the Income Tax Assessment Act 1997, the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time. (1) Subsection (3) of this section affects the calculation, under section 707‑325 of the Income Tax Assessment Act 1997 and section 707‑325 of this Act, of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (the formation time) the group became a consolidated group; and (b) the provisions described in subsection 707‑327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707‑327(1)(b) and (c) of this Act as if the bundle included the loss; and (d) subsection 707‑325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707‑325(1) of this Act chooses that this section apply in relation to the real loss‑maker. (2) Section 707‑325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. (3) Disregard for the purposes of subsection 707‑325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707‑325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or > Note: Disregarding such an event could have a direct or indirect effect on the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss‑maker’s modified market value calculated under section 707‑325 of the Income Tax Assessment Act 1997, if the real loss‑maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707‑325 of this Act to add an amount to the real loss‑maker’s modified market value for those purposes. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) that: (b) was transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from an entity other than the real loss‑maker. (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997. Disregard an event that is described in subsection 707‑325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707‑325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004. (1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss‑maker) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time) the transferee became the head company of a consolidated group; and (ii) the conditions in one or more of paragraphs 165‑15(1)(a), (b) and (c) did not exist in relation to the real loss‑maker; and (da) the real loss‑maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non‑transferred losses) of the same sort that the transferee made without a transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non‑transferred losses). (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. <table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Limit on utilising the losses</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For this income year:</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the losses that the transferee may utilise cannot exceed:</span></p></td></tr></thead><tbody><tr><td style="width:20.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:120.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The first income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span style="font-size:8pt; vertical-align:2pt">1</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The second income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) </span><span style="font-size:8pt; vertical-align:2pt">2</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the amount of the losses utilised for the income year mentioned in item</span><span> </span><span>1</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The third income year ending after the initial transfer time, or a later income year</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time</span></p></td></tr></tbody></table> ``` (4) Subdivision 707‑C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707‑A of that Act. > Note: This has 2 effects. First, Subdivision 707‑C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707‑A of that Act). (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). (7) This section does not limit the transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company. In working out when a choice may be made under subsection 707‑325(5), 707‑327(5), 707‑328A(4) or 707‑350(5), ignore losses to which section 713‑535 of the Income Tax Assessment Act 1997 applies. > Note: That section deals with losses transferred under Subdivision 707‑A of that Act from certain wholly‑owned subsidiaries of life insurance companies that are members of a consolidated group. Section 707‑405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act. (1) This section reduces the adjustable value of a notional asset that section 40‑35, 40‑37, 40‑38, 40‑40 or 40‑43 treats the head company of a consolidated group as holding, if: (b) that section treats the leaving entity as holding a notional asset because of section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997. > Note: Section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time. The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences. (1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event) happening involving an entity (the originating entity) and another entity (the recipient entity) if: (a) the event occurs in connection with a life insurance company (the member life insurance company) becoming a member of a consolidated group; and (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest) in a company or in another trust. (a) a life insurance company transfers an asset (also the original asset) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320‑200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset) to its segregated exempt assets where, apart from this Subdivision, section 320‑255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event) is made in connection with the life insurance company (also the member life insurance company) becoming a member of a consolidated group. (1) This Subdivision applies only if the originating entity (for a section 713‑505 case) or the life insurance company (for a section 713‑510 case) chooses that it apply. (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713‑510 of the Income Tax Assessment Act 1997; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713‑510 of the Income Tax Assessment Act 1997; and (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs. This Act, and the Income Tax Assessment Act 1997, apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group. (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain) that the originating entity would have made as a result of the deferral event is disregarded; and (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount) under paragraph 320‑15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (1) This section operates if, after the deferral event happens, another event (the new event) happens where the new event is: (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (i) the original asset being transferred to or from the company’s virtual PST under section 320‑180, 320‑185 or 320‑195 of the Income Tax Assessment Act 1997; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320‑235, 320‑240 or 320‑250 of that Act; or (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. > Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713‑505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (1) For a section 713‑505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713‑535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: (a) an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group at a time (the leaving time); and (b) but for the cessation of membership and section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision. Sections 716‑340 and 716‑345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. <table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:345.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Extended operation of sections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 1</span><br><span style="font-weight:bold">Sections</span><span style="font-weight:bold"> </span><span style="font-weight:bold">716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">340 and 716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">345 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> operate in relation to:</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 2</span><br><span style="font-weight:bold">In the same way as they operate in relation to:</span></p></td></tr></thead><tbody><tr><td style="width:5.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:161.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>46</span><span>‑</span><span>90 of that Act</span></p></td><td style="width:156.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>40</span><span>‑</span><span>455 of that Act</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software pool created under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure allocated to a software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Software, expenditure on which was in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>In</span><span>‑</span><span>house software, expenditure on the development of which is allocated to a software development pool</span></p></td></tr></tbody></table> ``` (1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: Section 703‑30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004. (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time) a wholly‑owned subsidiary of the entity that became the head company of the group (the head entity), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier‑1 company of the group at the formation time. Despite the amendment of section 719‑30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) Section 719‑160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719‑160(3) of the Income Tax Assessment Act 1997. (3) However, that effect of section 719‑160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division. (2) Paragraphs 701‑1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier‑1 company at the time the MEC group came into existence. (a) the entity and one or more other entities were members of a potential MEC group as eligible tier‑1 companies, throughout the period: (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier‑1 company, at the time the transitional group came into existence. To avoid doubt, sections 707‑325 and 707‑327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719‑305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707‑A of that Act. Subsection 719‑325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006. (1) A reference in an agreement to item 25 of the table in subsection 721‑10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: (1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: Division 725 applies to a scheme entered into on or after 1 July 2002. It also applies to a scheme entered into on or after 27 June 2002, but only if: ### Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (1) Division 727, as inserted by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 and amended by the New Business Tax System (Consolidation and Other Measures) Act 2003, applies to a scheme entered into on or after 1 July 2002. (b) a presumed indirect value shift that happens under the scheme and affects a realisation event that happens on or after 1 July 2002. (a) the economic benefits taken into account in determining that the scheme has resulted in that indirect value shift or presumed indirect value shift include economic benefits provided by: > Note: In that case, the consequences of the trigger event are worked out under Division 138 or 139 of the Income Tax Assessment Act 1997: see items 13 and 14 of Schedule 15 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002. (1) An indirect value shift does not have consequences under Division 727 of the Income Tax Assessment Act 1997 if, to the extent of at least 95% of their total market value, the greater benefits consist entirely of: (a) a right to have services that are covered by section 727‑240 of that Act provided directly by the losing entity to the gaining entity; or (d) if the losing entity’s 2002‑2003 income year ends before 30 June 2003—the start of the losing entity’s 2004‑2005 income year. (2) For the purposes of section 727‑850 (about a presumed indirect value shift affecting a realisation event) of the Income Tax Assessment Act 1997, subsection (1) of this section applies to the presumed indirect value shift: #### 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (2) Paragraph 727‑470(2)(a) of the Income Tax Assessment Act 1997 (as in force immediately before the commencement of this section) continues to have effect in relation to the indirect value shift as if the repeals and amendments made by Schedule 1, Parts 1 and 2 of Schedule 3 and Schedule 8 to the Tax Laws Amendment (Small Business) Act 2007 had not been made. ## Division 328 Small business entities 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you ## 328‑1 Definitions 328‑1 Definitions > new Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force after the commencement of this section. > old Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. > STS taxpayer means an STS taxpayer within the meaning of Division 328 of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. ## 328‑110 Working out whether you are a sm 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years #### 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years (1) This section applies for the purpose of working out whether you are a small business entity (other than because of subsection 328‑110(4) of the Income Tax Assessment Act 1997) for the 2007‑08 or 2008‑09 income year. (2) You work out your aggregated turnover for the 2005‑06 or 2006‑07 income year as if the amendments made by Schedule 1 to the Tax Laws Amendment (Small Business) Act 2007 had been in force in relation to that year. (a) your aggregated turnover for the 2005‑06 income year (worked out in accordance with subsection (2)) is $2 million or more; but (b) your STS group turnover for that year (worked out under Subdivision 328‑F of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section) is less than $2 million. ## 328‑111 Access to certain small business 328‑111 Access to certain small business concessions for former STS taxpayers that are winding up a business (2) The following provisions apply as if you are a small business entity for the income year in which you are winding up the business: ## 328‑112 Working out whether you are a sm 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you #### 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you (1) For the purpose of working out whether you are a small business entity for the 2007‑08, 2008‑09, 2009‑10 or 2010‑11 income year (each a relevant income year) for the purposes of a provision to which subsection (3) applies: (2) An entity (the first entity) controls a discretionary trust for a relevant income year if, for any of the 4 income years (a previous income year) before that year: (a) if the previous income year is before the 2007‑08 income year—the trustee of the trust made a distribution of $100,000 or more to the first entity, any of its affiliates, or the first entity and any of its affiliates; or (i) the trustee of the trust paid to, or applied for the benefit of, the first entity, any of the first entity’s affiliates, or the first entity and any of its affiliates, any of the income or capital of the trust; and (ii) the percentage (the control percentage) of the income or capital paid or applied is at least 40% of the total amount of income or capital paid or applied by the trustee for that year. ## 328‑115 When you stop using the STS acco 328‑115 When you stop using the STS accounting method (1) This section sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (2) This section also sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (3) Any ordinary income that, apart from paragraph 328‑105(1)(a) of the Income Tax Assessment Act 1997 (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have derived before the changeover year (while you were using the STS accounting method) and you have not included in your assessable income because you have not received it is included in your assessable income for the changeover year. (4) Any general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, that, apart from paragraph 328‑105(1)(b) of that Act (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have incurred before the changeover year (while you were using the STS accounting method) and that you have not deducted because you have not paid them can be deducted for the changeover year. ## 328‑120 Continuing to use the STS accoun 328‑120 Continuing to use the STS accounting method (b) for any later income year for which you are a small business entity but only if you used the STS accounting method for the income year before that later year. > Note: Example: You are a small business entity for the 2007‑08 and 2008‑09 income years and you continue to use the STS accounting method for those years. You are not a small business entity for the 2009‑10 income year so you cannot continue to use the STS accounting method for that year. Because you cannot use the STS accounting method for the 2009‑10 income year, you will not be able to use it again for a later income year even if you are a small business entity for that later year. ## 328‑125 Meaning of STS accounting method 328‑125 Meaning of STS accounting method In sections 328‑115 and 328‑120, STS accounting method means the accounting method that was required by the Income Tax Assessment Act 1997 to be used by STS taxpayers for the 2004‑05 income year. ## 328‑175 Choices made in relation to depr 328‑175 Choices made in relation to depreciating assets used in primary production business (b) you made a choice under subsection 328‑175(3) of old Subdivision 328‑D in relation to a depreciating asset you use to carry on a primary production business and for which you could deduct amounts under Subdivision 40‑F or 40‑G of the Income Tax Assessment Act 1997. ## 328‑180 Increased access to accelerated 328‑180 Increased access to accelerated depreciation from 12 May 2015 to 30 June 2026 (2) In determining whether you can choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997 in an increased access year, disregard subsection 328‑175(10) of that Act. (3) In applying paragraph 328‑175(10)(b) of that Act for the purpose of determining whether you can choose to use that Subdivision in any income year after the increased access years, disregard: (4) Paragraph 328‑180(1)(b) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that paragraph to $1,000: (i) first used the asset, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (i) first used the asset, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (i) first used the asset, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, on or after 1 July 2023 and on or before 30 June 2026. (a) a reference in that paragraph to the end of the income year in which you start to use the asset, or have it installed ready for use, for a taxable purpose were a reference to the earlier of: if: (i) first used the asset, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021. (5) Paragraph 328‑180(2)(a) or (3)(a) of the Income Tax Assessment Act 1997 applies to an amount included in the second element of the cost of an asset as if a reference in that paragraph to $1,000: (5A) For the purposes of determining whether, under subsection 328‑180(2) of the Income Tax Assessment Act 1997, you can deduct, for an income year (the current year), the taxable purpose proportion of an amount included in the second element of the cost of an asset, disregard paragraph (b) of that subsection if: ## 328‑181 Full expensing—2020 budget time 328‑181 Full expensing—2020 budget time to 30 June 2023 (2) For the purposes of determining whether subsection 328‑180(1) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (b) of that subsection (which sets a limit of $1,000 on the cost of the asset) if, in the period beginning at the 2020 budget time and ending on 30 June 2023, you: (3) For the purposes of determining whether subsection 328‑180(2) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (a) of that subsection (which sets a limit of $1,000 on the amount) if the amount is included in the second element of the cost of the asset at any time in the period beginning at the 2020 budget time and ending on 30 June 2023. (4) In applying paragraph 328‑180(3)(a) of the Income Tax Assessment Act 1997 to an asset, disregard an amount included in the second element of the cost of the asset if the amount is deducted under subsection 328‑180(2) of that Act, as modified by subsection (3) of this section. (5) Section 328‑210 of the Income Tax Assessment Act 1997 applies as if the words “less than $1,000 but” in subsection (1) were disregarded, in relation to a deduction for an income year that ends: ## 328‑182 Backing business investment 328‑182 Backing business investment Subsection 328‑190(2) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that subsection to 15% were a reference to 57.5% if you are covered by section 40‑125 for the asset (which is about backing business investment). ## 328‑185 Depreciating assets allocated to 328‑185 Depreciating assets allocated to STS pools (1) A depreciating asset of yours that had been allocated to your general STS pool is treated as being allocated to your general small business pool. (2) A depreciating asset of yours that had been allocated to your long life STS pool is treated as being allocated to your long life small business pool. (3) If you made a choice, under subsection 328‑185(5) of old Subdivision 328‑D, not to have a depreciating asset allocated to your long life STS pool, the choice has effect for the purposes of subsection 328‑185(5) of new Subdivision 328‑D. ## 328‑195 Opening pool balances for 2007‑0 328‑195 Opening pool balances for 2007‑08 income year (1) This section applies if a depreciating asset of yours is treated as being allocated to your general small business pool or long life small business pool under section 328‑185. (2) The opening pool balance of your general small business pool or long life small business pool for the 2007‑08 income year is taken to be the closing pool balance of your general STS pool or long life STS pool, as the case requires, for the 2006‑07 income year, reduced or increased by any adjustment required under section 328‑225 of new Subdivision 328‑D (about change in the business use of an asset). (a) you were not an STS taxpayer for the 2006‑07 income year (because you stopped being an STS taxpayer before that time); but (b) you are a small business entity for the 2007‑08 income year or a later income year and you choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets for that income year; the opening pool balance of your general small business pool or long life small business pool includes the sum of the taxable purpose proportions of the adjustable values of depreciating assets allocated to the pool under subsection 328‑185(3) of new Subdivision 328‑D for that year. ## 328‑200 General small business pool for 328‑200 General small business pool for the 2012‑13 income year (1) This section applies for the purposes of applying Subdivision 328‑D of the Income Tax Assessment Act 1997 for the 2012‑13 income year and later income years. (2) A depreciating asset that had been allocated to your long life small business pool is treated as being allocated to your general small business pool. (a) the closing pool balance of your general small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under section 328‑225 of that Act; and (b) the closing pool balance of your long life small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under that section. ## 328‑440 Taxpayers who left the STS on or 328‑440 Taxpayers who left the STS on or after 1 July 2005 (1) This section applies if you chose to stop being an STS taxpayer for the 2005‑06 income year or the 2006‑07 income year. (2) You cannot choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets until at least 5 years after the income year for which you chose to stop being an STS taxpayer. > Note: Subdivision 328‑D of the Income Tax Assessment Act 1997 continues to apply to depreciating assets that have been allocated to your small business pools even if you are not a small business entity, or do not choose to use that Subdivision, for an income year: see section 328‑220 of that Subdivision. ## 328‑445 Bonus deduction for upskilling e 328‑445 Bonus deduction for upskilling employees of small business entities etc. (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct 20% of particular expenditure for your 2023‑24 income year if: (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (d) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑450 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (6) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. ## 328‑450 Expenditure eligible for the bon 328‑450 Expenditure eligible for the bonus deduction for upskilling employees of small business entities etc. (ii) if the provider is a registered body of a kind listed in paragraph (2)(b), (c) or (d)—the training is within the provider’s scope of registration for that kind of registered body; and (d) each enrolment, or arrangement, for the provision of the training is made or entered into at or after 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022; and > Note: Paragraphs (b) and (c) mean this section will not apply to expenditure for on‑the‑job training or training provided by you in house. (a) a registered higher education provider (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); (b) a NVR registered training organisation (within the meaning of the National Vocational Education and Training Regulator Act 2011); (c) a registered education and training organisation (within the meaning of the Education and Training Reform Act 2006 (Vic.)); ## 328‑455 Technology investment boost dedu 328‑455 Technology investment boost deduction (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct for your 2023‑24 income year an amount that is equal to the sum of: (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (3) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑460 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (4) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. ## 328‑460 What expenditure qualifies for t 328‑460 What expenditure qualifies for the technology investment boost (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (b) you incur the expenditure in the period starting at 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022 and ending at the end of: (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (4) For the purposes of paragraphs (1)(c) and (2)(c), in working out whether you can deduct an amount of expenditure on a depreciating asset, assume that: (b) throughout that effective life, you will use the asset for a taxable purpose to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose. ## 328‑465 Energy incentive 328‑465 Energy incentive (a) 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑470(1) or (3) applies in relation to the income year; and > Note: The deduction relates to the period of 1 July 2023 to 30 June 2024. An entity may have deducted an amount under paragraph (a) for a previous income year if the entity has a substituted accounting period. (2) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑470 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (3) Sections 8‑10, 40‑215 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. ## 328‑470 What expenditure qualifies for t 328‑470 What expenditure qualifies for the energy incentive (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (c) you start to use the asset, or have it installed ready for use, for any purpose after 30 June 2023 but before 1 July 2024; and (d) you start to use the asset, or have it installed ready for use, for a taxable purpose at a time (the start time) that is: (e) you are a small business entity, or an entity covered by subsection (4), for the income year that includes the start time; and (h) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) a new reasonably comparable depreciating asset that uses a fossil fuel (other than a use of which that is merely incidental) is available in the market at the start time; (ii) if the asset is being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than the other asset; (iii) if the asset is not being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than a new reasonably comparable depreciating asset that is available in the market at the start time; or (i) a depreciating asset (other than an asset excluded under subsection (6)) that uses electricity, or energy that is generated from a renewable source, to be more energy efficient; (iv) the use of electricity, or energy that is generated from a renewable source, by another depreciating asset to be monitored. (a) the amount is included in the second element of a depreciating asset’s cost under paragraph 40‑190(2)(a) of the Income Tax Assessment Act 1997; and (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (d) you are a small business entity, or an entity covered by subsection (4), for the income year in which the expenditure is incurred; and (i) if the asset could use a fossil fuel (other than a use of which that is merely incidental)—the asset to only use electricity, or energy that is generated from a renewable source; (ii) if the asset uses electricity, or energy that is generated from a renewable source—the asset to be more energy efficient; (g) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) For the purposes of paragraph (1)(b) or (3)(b), in working out whether you can deduct an amount of expenditure assume that: (i) for the purposes of paragraph (1)(b)—to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose; or (ii) for the purposes of paragraph (3)(b)—to the same extent as you use it for a taxable purpose in the income year in which the expenditure is incurred. (b) expenditure (other than expenditure referred to in subparagraph (3)(e)(i)) on an asset that can use a fossil fuel (other than a use of which that is merely incidental); (c) an asset that solely or predominantly generates electricity from a renewable source (for example, photovoltaic cells) or expenditure on such an asset; (d) an asset, or expenditure, being capital works for which you can deduct an amount under Division 43 of the Income Tax Assessment Act 1997; > Note: Subsections (1) and (3) also do not apply to an item of trading stock because such an asset is not a depreciating asset: see section 40‑30 of the Income Tax Assessment Act 1997. ## Division 355 Research and Development ## Subdivision 355 ‑D—Registration for activities before 2011‑12 income year ## 355‑200 Registration for activities befo 355‑200 Registration for activities before 2011‑12 income year A reference in each of the following provisions of the Income Tax Assessment Act 1997 to a registration under section 27A of the Industry Research and Development Act 1986 includes a reference to a registration under former section 39J of that Act: ## Subdivision 355 ‑E—Balancing adjustments for decline in value deductions for assets used in R&D activities ## 355‑320 Balancing adjustment—assets only 355‑320 Balancing adjustment—assets only used for R&D activities (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) the R&D entity cannot deduct an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from: (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D entity could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:22pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the R&D entity is taken to be able to deduct under subsection 355‑315(2) of the new Act that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the R&D entity’s assessable income for the event year under subsection 355‑315(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 for the asset, the R&D entity is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑446 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the R&D entity is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑465 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: Section 355‑315 of the new Act would otherwise apply for the event in a case where the R&D entity had new law deductions. ## 355‑325 Balancing adjustment—R&D partner 355‑325 Balancing adjustment—R&D partnership assets only used for R&D activities (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by an R&D partnership; and (i) the partner can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the partner chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D partnership could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the partner is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:21.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D entity</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D partnership</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the partner is taken to be able to deduct under subsection 355‑525(2) of the new Act the partner’s proportion of that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the partner’s assessable income for the event year under subsection 355‑525(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partner’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if one or more partners (including the partner) in the R&D partnership is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset, the partner is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑448 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the partner is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑467 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s deductions under section 355‑520 of the new Act mentioned in subsection (4A) of this section. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the partner for the event, do so apply to the partner for the event. > Note 1: Section 355‑525 of the new Act would otherwise apply for the event in a case where the partner had new law deductions. ## 355‑340 Balancing adjustment—tax exempt 355‑340 Balancing adjustment—tax exempt entities that become taxable Item 7 of the table in subsection 57‑110(2) in Schedule 2D to the Income Tax Assessment Act 1936 applies as if the deduction rules set out in the final column of that item also included former sections 73BA and 73BH of the Income Tax Assessment Act 1936. ## Subdivision 355 ‑F—Integrity rules ## 355‑415 Expenditure reduced to reflect g 355‑415 Expenditure reduced to reflect group mark‑ups For the purposes of step 1 of the method statement in subsection 355‑415(2) of the Income Tax Assessment Act 1997, also disregard amounts that have already been taken into account under former subsection 73B(14AA) of the Income Tax Assessment Act 1936 for the R&D entity, the grouped entity and the R&D activities for an earlier income year. ## Subdivision 355 ‑K—Modified application of the old R&D law ## 355‑550 Prepayments of R&D expenditure e 355‑550 Prepayments of R&D expenditure extending into the 2011‑12 income year (1) This section applies if, apart from former paragraph 73B(10)(a) of the Income Tax Assessment Act 1936, an eligible company could deduct advance R and D expenditure in one or more income years commencing on or after 1 July 2011. > Note: That deduction would be under former section 73B of that Act as that former section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (a) apart from Subdivision H (prepaid expenditure) of Division 3 of Part III of the Income Tax Assessment Act 1936, an eligible company can deduct an amount under former section 73B, 73BA, 73BH, 73QA, 73QB or 73Y of that Act for an income year commencing before 1 July 2011; and (c) apart from former paragraph 73B(10)(a) of that Act, the eligible company could deduct an amount, as a result of that application of that Subdivision, for an income year commencing on or after 1 July 2011. > Note: That deduction would be under that Act as it applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (3) Former paragraph 73B(10)(a) of that Act is taken to apply to those income years commencing on or after 1 July 2011 as if the reference in that former paragraph to section 39J of the Industry Research and Development Act 1986 were a reference to section 27A of that Act. (4) An expression used in this section that is also used in former section 73B of the Income Tax Assessment Act 1936 has the same meaning in this section as it has in that former section. ## Subdivision 355 ‑M—Undeducted core technology expenditure ## 355‑600 Scope 355‑600 Scope This Subdivision applies to core technology (within the meaning of former section 73B of the Income Tax Assessment Act 1936) if: (a) you incurred core technology expenditure (within the meaning of that former section) in an income year commencing before 1 July 2011 in relation to the core technology under one or more contracts entered into at or after the time referred to in former subsection 73B(12) of that Act; and (b) that expenditure (the undeducted expenditure) cannot be deducted for the last income year commencing before 1 July 2011. ## 355‑605 Core technology that is a deprec 355‑605 Core technology that is a depreciating asset (1) This section applies for the purposes of Division 40 of the Income Tax Assessment Act 1997, other than sections 40‑292 and 40‑293 of that Act, if the core technology (the asset) is a depreciating asset. (2) Disregard this section, including its effect on the amount you can deduct under section 40‑25 of that Act for the asset, for the purposes of working out: (3) The asset’s opening adjustable value for the first income year that commences on or after 1 July 2011 (the first new income year) is equal to the amount of the undeducted expenditure. (4) Subsection 40‑75(2) of the Income Tax Assessment Act 1997 applies to the asset as if the first new income year were a change year (within the meaning of that subsection). ## 355‑610 Core technology that is not a de 355‑610 Core technology that is not a depreciating asset If the core technology is not a depreciating asset, you can deduct the undeducted expenditure in equal proportions over a period of 5 income years starting in the first income year commencing on or after 1 July 2011. ## Division 375 Australian films ## Subdivision 375 ‑G—Film losses ## 375‑100 Film component of tax loss for 1 375‑100 Film component of tax loss for 1997‑98 or later income year To work out the film component (if any) of your tax loss for the 1997‑98 income year or a later income year, apply former section 375‑805 of the Income Tax Assessment Act 1997. ## 375‑105 Film component of tax loss for 1 375‑105 Film component of tax loss for 1989‑90 to 1996‑97 income years If you incurred a film loss for the purposes of former section 79F (Film losses of 1989‑90 to 1996‑97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989‑90 to 1996‑97 income years, that film loss is the film component of your tax loss for that income year. ## 375‑110 Film loss for 1989‑90 or later i 375‑110 Film loss for 1989‑90 or later income year (1) To work out your film loss (if any) for the purposes of the Income Tax Assessment Act 1997 for the 1989‑90 or a later income year, apply former section 375‑810 of that Act. (2) You can deduct in the 1997‑98 or a later income year your film loss for any of the 1989‑90 to 1996‑97 income years only to the extent that it has not already been deducted. ## Division 392 Long‑term averaging of primary producers’ tax liability ## 392‑1 Application of Division 392 of the 392‑1 Application of Division 392 of the Income Tax Assessment Act 1997 (1) Division 392 of the Income Tax Assessment Act 1997 applies to assessments for the 1998‑99 income year and later income years. (a) it had applied to your assessment for each income year before the 1998‑99 income year for which Division 16 of Part III of the Income Tax Assessment Act 1936 applied in relation to your income; and (b) you had carried on a primary production business during each income year before the 1998‑99 income year when you carried on a business of primary production; and (c) for each income year before the 1998‑99 income year you had a basic taxable income equal to your taxable income for the income year for the purposes of Division 16 of Part III of the Income Tax Assessment Act 1936. > Note: Section 149A of the Income Tax Assessment Act 1936 identifies what your taxable income for an income year is for the purposes of Division 16 of Part III of that Act. ## 392‑25 Transitional provision—election u 392‑25 Transitional provision—election under section 158A of the Income Tax Assessment Act 1936 Division 392 of the Income Tax Assessment Act 1997 does not apply to your assessment for the 1998‑99 income year or a later income year if you made an election under section 158A (Election that Division not apply) of the Income Tax Assessment Act 1936 relating to an income year before the 1998‑99 income year. ## Division 393 Farm management deposits ## Subdivision 393 ‑A—Tax consequences of farm management deposits 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 ## 393‑1 Application of Division 393 of the 393‑1 Application of Division 393 of the Income Tax Assessment Act 1997 ## 393‑5 Unrecouped FMD deduction 393‑5 Unrecouped FMD deduction A reference in Division 393 of the Income Tax Assessment Act 1997 to a deduction under section 393‑5 of that Act for making a farm management deposit is taken to include a reference to a deduction under section 393‑10 in Schedule 2G to the Income Tax Assessment Act 1936, as in force just before the commencement of this section, if the deposit was made before the 2010‑11 income year. ## 393‑10 Unrecouped FMD deduction for depo 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 #### 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 (b) the deposit was made with an FMD provider as a result of a request to which section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, applied; the unrecouped FMD deduction in respect of the deposit at that time is equal to the amount of the unrecouped deduction (within the meaning of the former subsection 159GA(3) of the Income Tax Assessment Act 1936) in respect of the deposit immediately before it ceased to be a deposit under the Loan (Income Equalization Deposits) Act 1976. > Note: This means that the unrecouped deduction relating to the deposit under the Loan (Income Equalization Deposits) Act 1976 continues to apply (by becoming an unrecouped FMD deduction) when the deposit is transferred to an FMD provider as a farm management deposit. The Loan (Income Equalization Deposits) Act 1976 was repealed on 22 February 2005. ## 393‑27 Trustee may choose that a benefic 393‑27 Trustee may choose that a beneficiary is a chosen beneficiary of the trust If a beneficiary of a trust was covered by paragraph (c) of the definition of primary producer in section 393‑25 in Schedule 2G to the Income Tax Assessment Act 1936 in the 2009‑10 income year, treat subsection 393‑25(3) of the Income Tax Assessment Act 1997 as having applied to the beneficiary for the purpose of determining the maximum number of choices that the trustee may make under subsection 393‑27(2) of that Act for the 2010‑11 income year. ## 393‑30 Unclaimed moneys 393‑30 Unclaimed moneys (a) a farm management deposit of an owner was unclaimed moneys for the purposes of section 69 of the Banking Act 1959; and (2) For the purpose of subsection 393‑10(1) of the Income Tax Assessment Act, treat the repaid unclaimed moneys as a repayment of the deposit of the owner. (3) To avoid doubt, the payment of unclaimed moneys to the Commonwealth under section 69 of the Banking Act 1959 is not a repayment of the deposit of the owner for the purposes of Division 393 of the Income Tax Assessment Act 1997. ## Subdivision 393 ‑B—Meaning of farm management deposit and owner 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 ## 393‑40 The day the deposit was made for 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 #### 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 If a farm management deposit was made with an FMD provider as a result of a request under section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, then: (a) subsections 393‑40(1) to (4) of the Income Tax Assessment Act 1997 apply as if the day the deposit was made was the day on which the deposit was originally made under the Loan (Income Equalization Deposits) Act 1976; and ## Division 410 Copyright collecting societies ## 410‑1 Application of section 51‑43 of th 410‑1 Application of section 51‑43 of the Income Tax Assessment Act 1997 (1) A copyright collecting society to which section 51‑43 of the Income Tax Assessment Act 1997 applies, may elect that, from 1 July 2004, the section apply to all ordinary income, and statutory income, collected or derived by the society on or after 1 July 2004. ## Division 415 Designated infrastructure projects ## Subdivision 415 ‑B—Application of Subdivision 415‑B of the Income Tax Assessment Act 1997 ## 415‑10 Application of Subdivision 415‑B 415‑10 Application of Subdivision 415‑B of the Income Tax Assessment Act 1997 ## Part 3 ‑50—Climate change (a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and (2) Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001 (the new Act) applies to the plant on this basis: (a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant’s opening adjustable value; and (b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and (c) if you excluded an amount from your assessable income under section 42‑290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999—the cost of the plant, and its opening adjustable value, are reduced by that amount; and (d) if subparagraph (1)(b)(ii) applies to you—you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi‑owner of the plant under the former Act continue. (3) If you were using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis: (a) for the diminishing value method—replace the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate you were using; and (i) replace the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate you were using; and (ii) increase the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note 1: Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced. > Note 2: Small business entities can choose to work out the decline in value of their depreciating assets under Division 328. (a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or (3) If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40‑70(1) or 40‑75(1) of the new Act that includes the plant’s effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and (2) For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets. (3) For a case where the plant is merged into another depreciating asset, section 40‑125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it. (b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and (a) you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and (b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU’s opening adjustable value. (1) Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001. (2) For a unit of software for which you were deducting amounts under Subdivision 46‑B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis: (d) you must use the same effective life you were using under Subdivision 46‑B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001. (1) This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day. (b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and (c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and (1) This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001. > Note: Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8). (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330‑80 of the former Act for your income year ending on 30 June 2001; and (c) in applying the formula in section 40‑75 of the new Act for the income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The remaining effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these: (i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and (ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (7) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and (b) the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of expenditure incurred in carrying on eligible quarrying operations—the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (i) you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day) after 30 June 2001; or (ii) the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day) after 30 June 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which the start day occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year. there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (1) This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330‑H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and (c) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (i) any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset); (i) any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (4) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (4) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (b) the expenditure would have been transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330‑H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for your income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (1) Despite subsections 40‑35(5), 40‑38(5) and 40‑40(4), there is no additional decline in the value of the notional asset referred to in those subsections if: (a) apart from this section, subsection 40‑35(5), 40‑38(5) or 40‑40(4) would apply because the real asset referred to in that subsection is disposed of; and (a) at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373‑35 of the former Act; and (b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day. (a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and (1) Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time). (2) Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time. (a) you have deducted or can deduct an amount under Subdivision 387‑G of the former Act for an amount (the qualifying amount) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and (b) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and (1) This section applies to you if you have deducted or can deduct an amount under Subdivision 400‑A of the former Act for an amount (the qualifying amount) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400‑A of the former Act. (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and (c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400‑15(3) of the former Act; and (1) Units of plant that you had allocated to a pool under Subdivision 42‑L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act. (a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and (c) in applying the formula in section 40‑70 of the new Act for your income year in which 1 July 2001 occurs—it has a base value equal to that opening adjustable value; and (d) you replace the component in the formula in subsection 40‑70(1) of the new Act that includes an asset’s effective life with the pool percentage you were using for the pool; and (e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40‑115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and (f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset. (3) An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item). > Note 1: You work out the decline in value of an item removed under this subsection under Subdivision 40‑B of the new Act, using the cost for it worked out under section 40‑205 of the new Act. (b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset. (2) The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year) in this way: (a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and (b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section. (a) for a unit of plant (including IRUs and expenditure on software that is not pooled)—its undeducted cost at the end of 30 June 2001; or (b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence—the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or (c) for transport capital expenditure—the entity’s amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or (d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (e) for expenditure on evaluating the impact on the environment of a project—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (f) for assets that were pooled under Subdivision 42‑M or 42‑L of the former Act—the closing balance of the pool at the end of 30 June 2001. (4) The asset’s base value for applying the formula in section 40‑70 of the new Act for the diminishing value method is that opening adjustable value. (5) The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an item of plant for which you were using the prime cost method—using the rules in section 40‑10 of this Act; and (c) for a unit of software for which the entity was deducting amounts under Subdivision 46‑B of the former Act—using the rules in subsection 40‑25(2) of this Act; and (f) for an amount of expenditure on evaluating the impact on the environment of a project—using the rules in section 40‑55 of this Act. (6) The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an amount of unrecouped expenditure under Division 330 of the former Act—using the rules in section 40‑35 of this Act; and (b) for an amount of transport capital expenditure under Division 330 of the former Act—using the rules in section 40‑40 of this Act; and (7) The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act. (a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑C of the former Act; or (b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑H of the former Act; or (c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387‑B of the former Act; or (d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; or (e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365. (9) The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001. (10) You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount). (11) You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount. (1) Subsections 40‑65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened: (b) you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act. (a) paragraph 40‑65(6)(a) of the Income Tax Assessment Act 1997 included both events set out in subsection (1) of this section; and (b) subsections 40‑65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events. (1) A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936. (2) An amount you have deducted or can deduct for a water facility under Subdivision 387‑B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40‑F of the new Act. (3) A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936. (a) you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40‑115 (about splitting a depreciating asset) or 40‑125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and (b) it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40‑72 of that Act; (2) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if: (c) it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40‑72 of that Act. (3) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset) before 10 May 2006 if: (b) the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and (d) it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40‑72 of that Act. (a) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you: (b) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001. (2) If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act. (3) Otherwise, Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section. (a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or (b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or (ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life. (1) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001. > Note: If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40\. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997. (1A) Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001. (1B) Subsection (1) applies to a mining, quarrying or prospecting right (the new right) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if: (i) the other company is a member of the same wholly‑owned group as the original holder and was a member of that group just before that day; and (ii) the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer. (1D) Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if: (b) the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001. (a) you acquired, under an interest realignment arrangement, an interest (a new interest) in a mining, quarrying or prospecting right; and (b) the interest was acquired in exchange for one or more other interests (old interests) in other mining, quarrying or prospecting rights; and Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001. (a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or (b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership; the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act. (3) An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that: (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act. (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act. (6) Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243. (7) An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if: (a) you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and (8) The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section. (c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act. (2) Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001. A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act. if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011. (2) The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011. (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset for an income year is the amount worked out under section 40‑130 if: (a) the income year is the year in which you start to use the asset, or have it installed ready for use, for a taxable purpose; and (b) subsection (2) (about businesses with turnover less than $500 million) applies to you for the year and for the income year in which you started to hold the asset (if that was an earlier year); and > Note 1: An effect of paragraph (1)(a) is that this Subdivision only applies to one income year per asset. See also subsection 40‑135(1). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $500 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. Exception—assets for which the decline in value is worked out under section 40‑82 or Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (3) However, this section does not apply to a depreciating asset for an income year if you work out the decline in value of the asset for the income year under any of the following: (1) For the purposes of paragraph 40‑120(1)(c) and section 328‑182, you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you: > Note: Section 328‑182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997. (i) entering into a contract under which you hold the post‑12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑12 March 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post‑12 March 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (8) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (9) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (10) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (1) For the purposes of section 40‑120, the decline in value for the income year in which paragraph 40‑120(1)(a) is satisfied (the current year) is: > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 12 March 2020 to 30 June 2020 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2020 to 30 June 2021. (a) 50% of the asset’s cost as at the end of the current year, disregarding any amount included in the second element of the asset’s cost after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997, assuming its cost were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (3) However, the amount worked out under subsection (2) for an income year cannot be more than the amount that is the asset’s cost for the year. (a) 50% of the sum of the asset’s opening adjustable value for the current year and any amount included in the second element of its cost for that year, disregarding any amount included in that second element after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997 assuming: (ii) for the prime cost method—the component “Asset’s \*cost” in the formula in subsection 40‑75(1) of that Act (as adjusted under that section) were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (b) for the prime cost method—the sum of its opening adjustable value for the income year and any amount included in the second element of its cost for that year. (1) The decline in value of a depreciating asset is not worked out under this Subdivision for an income year if this Subdivision already applied in working out the decline in value of the asset for an income year. (2) For an income year later than the year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (3) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (4) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) You may choose that the decline in value of a particular depreciating asset for an income year, and subsequent income years, is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the first income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. If this Subdivision applies to work out the decline in value of a depreciating asset you hold for an income year, no other provision of this Act or the Income Tax Assessment Act 1997 applies to work out that decline in value. (1) For the purposes of this Subdivision, you are covered by this section for a depreciating asset if, on or before 30 June 2023: (2) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (3) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or Exception—assets for which the decline in value is worked out under Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (a) the asset is allocated to a low‑value pool, or expenditure on the asset is allocated to a software development pool (see Subdivision 40‑E of the Income Tax Assessment Act 1997); or (b) you or another taxpayer has deducted or can deduct amounts for the asset under Subdivision 40‑F of the Income Tax Assessment Act 1997 (about primary production depreciating assets). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $5 billion; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this section. (ii) if the 2019‑20 income year ends on or before 6 October 2020—the sum of your ordinary income (if any) and statutory income (if any) for the 2019‑20 income year; and (c) the sum of the amounts worked out under subsection (3) for the 2016‑17, 2017‑18 and 2018‑19 income years exceeds $100 million. (b) next, work out the cost of each of those assets (including any amounts included in the second element of the asset’s cost at a time that is in the income year); (4) For the purposes of subsection (3), disregard an asset if, at the time you first used the asset, or had it installed ready for use, for a taxable purpose: (a) it was not reasonable to conclude that you would use the asset principally in Australia for the principal purpose of carrying on a business; or (5) For the purposes of paragraph (3)(b), to work out the cost of a depreciating asset that is capital works (see section 43‑20 of the Income Tax Assessment Act 1997): (a) disregard section 40‑45 of that Act and work out the cost of the capital works using Subdivision 40‑C of that Act; and (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under subsection (3) if: (a) where section 40‑155 covers you for the current year (regardless whether section 40‑157 also covers you for the current year)—an exclusion applies to you and the asset for the current year under section 40‑165 (about exclusions for businesses with turnover of $50 million or more); or (ii) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s start time occurs in the current year—the asset’s cost as at the end of the current year, disregarding any amount included in the asset’s cost after 30 June 2023; or (b) if the asset’s start time occurred in an earlier year—the sum of its opening adjustable value for the current year and any amount included in the second element of its cost for the current year, disregarding any amount included in the asset’s cost after 30 June 2023. > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 6 October 2020 to 30 June 2021 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2021 to 30 June 2022. (a) where paragraph 40‑160(2)(a) applies—section 40‑155 would not cover you for the income year if the reference in that section to $5 billion were instead a reference to $50 million; and (i) entering into a contract under which you hold the post‑6 October 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑6 October 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of satisfying paragraph 40‑160(1)(a) for the post‑6 October 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you already satisfied paragraph 40‑160(1)(a) of this Act for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (9) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (1) For the purposes of subsections 40‑160(2) and 40‑170(1A), an exclusion applies to you and an asset for an income year if any of the exclusions in this section applies in relation to the asset. (4) This exclusion applies in relation to the asset if the asset is available for use, at any time in the income year, by any of the following: (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under this section if: (ii) you started to use the asset, or have it installed ready for use, for a taxable purpose in an earlier income year; and (b) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under section 40‑82 of the Income Tax Assessment Act 1997—the amount worked out under subsection (3); or (b) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under Subdivision 40‑BA of this Act—the amount worked out under subsection (4); or Assets affected by section 40‑82 of the Income Tax Assessment Act 1997 (about assets costing less than $150,000, medium sized businesses) (a) the amount that would be the asset’s decline in value for the year under section 40‑82 of the Income Tax Assessment Act 1997, assuming the reference in subparagraph 40‑82(3A)(b)(ii) of that Act to 31 December 2020 were instead a reference to the 2020 budget time; and (a) the amount that would be worked out under paragraph 40‑130(2)(a) or (4)(a) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(a) and (4)(a) to 30 June 2021 were instead references to the 2020 budget time; and (c) the amount that would be worked out under paragraph 40‑130(2)(b) or (4)(b) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(b) and (4)(b) to “the amount worked out under paragraph (a)” were instead references to “the amounts worked out under paragraphs 40‑170(4)(a) and (b)”. (a) the amount that would be the asset’s decline in value for the year under Division 40 of the Income Tax Assessment Act 1997, disregarding any amounts included in the eligible second element worked out under section 40‑175 of this Act for the asset for the year; and The amount worked out under this section (the eligible second element) for a depreciating asset for an income year is the sum of any amounts included in the second element of the asset’s cost at a time that is in both of the following periods: (1) For an income year later than a year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (2) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (3) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) This section applies if the decline in value for a depreciating asset for an income year is worked out under this Subdivision, and at a time (the balancing adjustment time) in a later income year: (i) it becomes not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (b) none of the requirements in paragraphs 40‑295(1)(a), (b) or (c) of the Income Tax Assessment Act 1997 are satisfied in relation to the asset. (2) For the purposes of Subdivision 40‑D of the Income Tax Assessment Act 1997 assume that, at the balancing adjustment time, you stop using the asset, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again. (3) For the purposes of section 40‑180 of the Income Tax Assessment Act 1997 assume that the reference in item 3 of the table in subsection 40‑180(2) of that Act to “because you stop using it for any purpose expecting never to use it again” were instead a reference to “because of section 40‑185 of the Income Tax (Transitional Provisions) Act 1997”. (4) If a balancing adjustment event happens to a depreciating asset you hold because of this section, this Subdivision cannot apply to work out the decline in value of the asset for a later income year. (1) You may choose that the decline in value of a particular depreciating asset for an income year is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year. (1) Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40. (a) you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset: (ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and (4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day. (5) The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if: (i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or (ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and  > sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose. (7) Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens: (a) if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b). (i) an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and (ii) the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and (3) The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount. (a) on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and (c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and (ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal; (2) There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal. (3) Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount. If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997. (a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and (b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and: (i) the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, the R&D entity is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—a clawback amount under section 355‑447 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑466 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. (b) section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions. > Note 2: The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and: (i) the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset; (ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, an R&D entity (the partner) that is a partner in the R&D partnership and is entitled to one or more new law deductions for one or more income years for the asset, is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—a clawback amount under section 355‑449 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑468 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s new law deductions mentioned in paragraph (2)(b) of this section. (4) Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event. > Note: Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions. (1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant. (b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and (3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it. (a) there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and (b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act. (2) The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor. (3) The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and <table cellspacing="0" cellpadding="0" style="width:364.2pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:353.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading" style="page-break-inside:avoid"><span>Conditions for small business taxpayers retaining accelerated rates</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Condition</span></p></td></tr></thead><tbody><tr><td style="width:21.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:321.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>The transferee must have been a small business taxpayer for the income year (the </span><span style="font-weight:bold; font-style:italic">start year</span><span>) that includes the time when the entity first used the plant, or first had it installed ready for use.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>2</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>At that time, neither of these applies:</span></p><p class="Tablea"><span>(a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;</span></p><p class="Tablea"><span>(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection</span><span> </span><span>(5).</span></p></td></tr></tbody></table> ``` (4) For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership. (5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement. (a) for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or (i) replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and (ii) increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).  (b) if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11). (c) that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and (d) that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and (e) that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity. (a) for taxable supplies (if any) the entity makes during the year in the course of carrying on a business—the value (as defined by section 9‑75 of the GST Act) of the supplies; and (b) for other supplies the entity makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies. (1) The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for: (a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (c) for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or (d) for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant. (3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115. (4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain. (5) Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee. (i) the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or (a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and (1) A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act. (2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year. For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if: Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act. (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset): and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply. (i) for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or (ii) for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and (c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act. (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and (2) Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act. The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under: (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on: (2) You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act. (3) A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under: (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and (2) Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act. A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act. The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001. If: (d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act; (a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and (a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and (b) the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and (c) paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997. Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years. (1) For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section. (b) the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (b) that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (1) There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea" style="page-break-after:avoid"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a); and</span></p><p class="Tablea" style="page-break-after:avoid"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (b) disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (f) an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division. (4) If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45‑5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest. (5) If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45‑10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest. Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Disregard the use of the following amounts in determining (for the purposes of Subdivision 50‑A of the Income Tax Assessment Act 1997 whether a fund established before 1 July 1997 operates and pursues its purposes in Australia: Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years. (2) However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date. Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if: (b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time. Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years. 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years (1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act. <table cellspacing="0" cellpadding="0" style="margin-left:56.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:258.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Application provisions for specific sections</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-size:9pt; font-weight:bold">Item</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">This section of the </span><span style="font-size:9pt; font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-size:9pt; font-weight:bold"> ...</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">Applies as described in this provision of this Act ...</span></p></td></tr></thead><tbody><tr><td style="width:24.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55(1)</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>95</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>8</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td></tr></tbody></table> ``` (a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and (b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997. > Note: Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year. (b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997; sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997). > Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock. (3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997. (a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and (b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936; > Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal. #### 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997. (1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year. (2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936. (3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year: (a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners; (b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed. > Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year. > Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year. (b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year; the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year. (2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. (3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2). #### 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997. #### 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business (1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. (2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity. > Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997. (1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. (2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value. > Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997. #### 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year. (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. > Note: Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. > Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given). (5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act). (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment. > Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%. (5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%. (6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.  > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section. (b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4). Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age. Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later. Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies. Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3. (4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997. (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%. > Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986. (5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D. > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. (a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and (b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year). (3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and (2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual: (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income. > Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F. > Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997. > Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997. #### 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 (1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012. (2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies. (3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act. (b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009. (2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if: (i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest; (iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or (i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest; (iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009. (2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time. (4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2): (a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and (b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being: (ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and (c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and (d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if: (i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or (ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and (e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and (i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and (ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and (g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest. (a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced: (i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or (ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and (b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5. (2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right. (3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right. (2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. (3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section. Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years. (1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision. > Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision). > Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936). > Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997. (a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936. (1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936. (2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997. > Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997. (3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and (d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; (f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time. > Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and (d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015. (a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or (4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if: (b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset. The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year. (a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and (1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied: (b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and (d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works). (3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936. Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936. (b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006. (2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement. > Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement. Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual: (b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her. 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act (1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee). (2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year: (3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection. #### 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997. Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936). (2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if: (a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; (a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011); (b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986. > Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section. If: (a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and (b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936; Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995. (1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997. (2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997. (3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997. (4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997. > Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one. Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year: (a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and (b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year; the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation. Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset. (b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section); > Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply. (1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if: (a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and (2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value. (4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value. (a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997. (2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less. (1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936: (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. (1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if: (2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by: (a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or (a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or (2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period. Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year: If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997. (1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002. (2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset. (3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required. (i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and (ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and (c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and (f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997). (a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or (1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:  > total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part. (a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or (2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section. (3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1). (1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences. > Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997. (c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets). (4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act. (5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act. Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement. (a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and (2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time. (a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and (ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs. (2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer. (a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and (b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest; (2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event. (3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly. (4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly. <table cellspacing="0" cellpadding="0" style="width:362.55pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:351.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Creating a CGT asset</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">CGT event number</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Applicable amount</span></p></td></tr></thead><tbody><tr><td style="width:50.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D1</span></p></td><td style="width:290.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the incidental costs the originating company incurred that relate to the CGT event</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D2</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the option</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D3</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the right</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>F1</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred on the grant, renewal or extension of the lease</span></p></td></tr></tbody></table> ``` (5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day. A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision. (a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996. (b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. (b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend. (3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities. (1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company. (2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred. (3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company. (1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of: (2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of: (3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note. (1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised. (b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and (ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act. You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and (b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996. (c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and (c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over. (3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. (a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and (c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and (d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act. (3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division. Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years. A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: (1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day. (2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice. (a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and (b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and (a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and (b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and (c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group. (5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004. (6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection. (1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss): (b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions); and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time: (i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or (e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and (f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and (ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred; (2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if: (a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these: (i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset; (ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and (3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act. (a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and (b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section. (5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of: (a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and (b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset. Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. (ii) that could have been deducted, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the deduction had not been limited by the company’s income for that income year; and (ii) that could have been applied, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the application of the loss had not been limited by the company’s capital gains for that income year. 170‑C Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred #### 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years. #### 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). #### Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997. Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997. If: (a) all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (d) that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and (e) the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place. Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years. > introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament. Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day. #### Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting #### 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B. (1) The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day. (2) No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted. #### 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting (1) Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if: (a) the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and (b) none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount. (2) No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount. (1) This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account. (2) For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. > Note 2: If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60. (3) For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)). (4) For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. (5) The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if: (a) during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and (b) the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section. (a) the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and (b) during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components. (7) For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. (8) Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it: (b) the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component. (9) Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component. (10) For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002: (b) lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination; (c) a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination); (e) the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination); (f) the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination). Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period: 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows: (a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and (i) in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and (ii) in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. > Note: A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002. #### 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002: (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:23.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:87.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A franking surplus</span></p></td><td style="width:220.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.009.png" width="175" height="58" alt="Start formula Amount of the class A franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.010.png" width="190" height="56" alt="Start formula Amount of the class B franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.011.png" width="190" height="56" alt="Start formula Amount of the class C franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` #### 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus): (a) a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Original surplus</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:85.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>class A</span></p></td><td style="width:220.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.012.png" width="169" height="38" alt="Start formula Amount of the original class A surplus times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.013.png" width="169" height="38" alt="Start formula Amount of the original class B surplus times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.014.png" width="169" height="38" alt="Start formula Amount of the original class C surplus times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (4) If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit): (a) a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company. (5) The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking deficit into 1997 Act franking debit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Original deficit</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking debit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(4)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:70.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A</span></p></td><td style="width:235.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.015.png" width="164" height="38" alt="Start formula Amount of the original class A deficit times start fraction 39 over 61 end fraction end formula "></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.016.png" width="164" height="38" alt="Start formula Amount of the original class B deficit times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.017.png" width="164" height="38" alt="Start formula Amount of the original class C deficit times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (2) A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if: (c) the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions. (3) The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if: (b) the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and (1) While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit. (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year. (3) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: > Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act. (1) The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account. (a) a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time; (3) If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if: (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity. #### 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If: the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time. (1) Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections. (2) If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year. Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year. Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year. (5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in: that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement. (6) The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (7) The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (2) The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (3) The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (i) are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and (a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and (b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section. (a) whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and (1) This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002. (a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and (3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded. (1) This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002; (2) If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (3) If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (4) If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. (5) If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows: (a) any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and (i) in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and (ii) in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. #### 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF.  #### 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act). (2) If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus): (a) a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF. (4) If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit): (a) a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF. This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period). (1) The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period: (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (1) The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period. (2) The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner. (3) The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5. (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and (d) the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner; the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received. (3) A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time: (1) A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends. (2) However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period. (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (a) the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed: (d) the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and (e) the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return. (2) The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day. (1) The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period. (2) The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made. Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period. (b) on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax); the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed: (c) the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and (d) the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return. (2) The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day. The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period: If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day. If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and If: (a) a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and (b) the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment; In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment. If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment. The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with. If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953. (1) Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period. (a) the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and (b) the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3); the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on: (c) if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or If: Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax. Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division. If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997. (a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day: (3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002. (a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002: > Note: As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date. (b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997. In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003. (1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year. (a) a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of: (i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time; (iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period; (2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if: (b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time: (ii) the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. > Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. > Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. (7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table: <table cellspacing="0" cellpadding="0" style="width:365.35pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount of the franking credit and the exempting debit</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">If:</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the credit and debit is:</span></p></td></tr></thead><tbody><tr><td style="width:22.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The period starts immediately after 7.30</span><span> </span><span>pm by legal time in the Australian Capital Territory on 13</span><span> </span><span>May 1997</span></p></td><td style="width:141.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Both these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was not in surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>All these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was in surplus at the start of the period;</span></p><p class="Tablea"><span>(c) the surplus in the account at the switch time is greater than the surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the franking surplus in the Australian company’s franking account at the switch time; and</span></p><p class="Tablea"><span>(b) the franking surplus in the Australian company’s franking account at the start of the period</span></p></td></tr></tbody></table> ``` (a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and (b) the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period. Subdivision 235‑I of the Income Tax Assessment Act 1997 applies to assets acquired by the trustee of an instalment trust in: (1) Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years. (2) However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time). (3) The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997. Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997. (2) Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in: (1) Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that: (b) is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose. (a) if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007. > Note: To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997. (b) contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option; the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option. (3) For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5). (4) If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is: (a) the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less (b) the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest. (5) If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is: (6) If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil. (1) If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one. (2) If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year. (3) If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year. (a) for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and (b) for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year: Step 1. Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. Step 2. Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3). Step 3. If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year. > Note: Example: Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75): (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred: (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times: (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate. Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008. (a) the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and (b) the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities: (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (i) the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or (ii) the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and (f) none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made: (i) Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event; (ii) a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year. (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (b) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (c) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year #### 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year (a) the requirements set out in paragraphs 275‑610(1)(a), (b) and (c) of the Income Tax Assessment Act 1997 are satisfied in respect of an amount of non‑arm’s length income of a managed investment trust in relation to an income year; and (b) the managed investment trust became a party to the scheme mentioned in paragraph 275‑610(1)(a) of that Act before the day on which the Bill that became the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 was introduced into the House of Representatives; and Division 276 of the Income Tax Assessment Act 1997 as inserted in that Act by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (the amending Act) applies as set out in subitem 1(1) of Schedule 8 to the amending Act. (b) if the trustee of the trust has made a choice for the purposes of paragraph 1(1)(b) of Schedule 8 to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016—the first income year starting on or after 1 July 2015; or (c) if the trustee of the trust has made a choice for the purposes of subparagraph 276‑10(1)(e)(i) of the Income Tax Assessment Act 1997 in respect of the 2016‑17 income year—that income year. (c) the trust is an AMIT for an income year (the discovery year) that is the starting income year or a later income year. (1) This section applies if the trust has an under or over of a character in the discovery year relating to the base year. (b) if, at a time, the trust sent its members distribution statements for an income year that is prior to the starting income year—assume that the trust sent those members AMMA statements for that income year at that time. (3) For the purposes of Division 276 of the Income Tax Assessment Act 1997, treat the under or over mentioned in subsection (1) as an under or over of the AMIT, in the discovery year relating to the base year, of the character mentioned in that subsection. (a) had the under or over mentioned in subsection (1) been discovered before the starting income year, this Act would have operated to produce a particular effect (the pre‑AMIT scheme effect) for the base year in relation to the amount or amounts reflected in the under or over; and 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT #### 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT (b) working out the amount (if any) of the entity’s capital gain under subsection 104‑70(4) of the Income Tax Assessment Act 1997. (3) For the purpose of working out the amount of the non‑assessable part mentioned in paragraph 104‑70(1)(b), treat the following provisions as being in operation at the time the payment was made: (b) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in paragraph (a). (4) Subsection (3) does not apply to the extent (if any) that the entity, in the income tax return that it lodged for the income year in which the payment was made, included the amount of the payment in its assessable income for that income year. (5) For the purposes of section 118‑20 of the Income Tax Assessment Act 1997, treat this section as being in Part 3‑1 of that Act. (2) The Commissioner cannot amend the entity’s assessment for the income year in which the payment was made in a particular way if: (b) the Commissioner could not amend the assessment in that way if the following provisions were in operation at the time the payment was made: (ii) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in subparagraph (i); and Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82‑10F). (2) The object of this section is to apply (with modifications) provisions limiting deductibility in respect of certain contributions made during the period that: (a) Subdivisions AA and AB of Division 3 of Part III of the Income Tax Assessment Act 1936, as in force just before they were repealed by the Superannuation Legislation Amendment (Simplification) Act 2007; (b) any other provision of the Income Tax Assessment Act 1936, or of any instrument made under that Act, to the extent that it relates to the operation of those Subdivisions; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of those Subdivisions. (b) the deduction limit mentioned in section 82AAC for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (c) the deduction limit mentioned in section 82AAT for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (d) Division 290 of the Income Tax Assessment Act 1997 did not apply to contributions made during the income year mentioned in paragraph (a). (2) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of a defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection and subsection (4), the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 5 September 2006; (b) the defined benefit interest mentioned in paragraph (2)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 5 September 2006, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (2)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (4) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of the defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection, the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 12 May 2009; (b) the defined benefit interest mentioned in paragraph (4)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 12 May 2009, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (4)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (1) The object of this section is to apply (with modifications) provisions relating to excess non‑concessional contributions tax in respect of certain contributions made during the period that: (b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision. (ea) in a case where paragraph 292‑95(1)(b) of that Act would have allowed the contribution mentioned in that paragraph to be made at a time within that period—that paragraph allowed the contribution to be made on or before 30 June 2007; and (f) paragraph 292‑95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and (fa) in a case where subsection 292‑100(2), (4), (7) or (8) of that Act would have allowed the contribution mentioned in that subsection to be made at a time within that period—that subsection allowed the contribution to be made on or before 30 June 2007; and (g) paragraph 292‑100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and (h) contributions made during that period that are covered under section 292‑100 of that Act reduce the person’s CGT cap amount for the 2007‑2008 financial year in accordance with subsection 292‑105(2) of that Act (and despite subsection (1) of that section); and (i) if the conditions in subsection (4) are satisfied—the person’s excess non‑concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and (b) the Commissioner gives the person a transitional release authority under subsection 292‑80A(2) in response to the application; and (c) the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292‑80B within 21 days after the date of the release authority; and (d) the superannuation provider pays the person the amount required under section 292‑80C in relation to the transitional release authority. (b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act). (6) The amount to be included in the first person’s amount of non‑concessional contributions under subparagraph (3)(b)(ii) is the sum of: (a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and (b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made. (c) under Division 295 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)), the contribution is included in the assessable income of the superannuation provider in relation to the superannuation plan to which the contribution is made; and (8) For the purposes of paragraph (7)(b), treat the person as an employee of the other entity if the person would be treated as an employee of the other entity under Division 290 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)). (1) A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007. (2) The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292‑80(3)(b)(i), the person would have excess non‑concessional contributions for the financial year mentioned in paragraph 292‑80(3)(a). (4) For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out: The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 21 days after the date of the release authority. (1) A superannuation provider that has been given a transitional release authority in accordance with section 292‑80B must pay to the person within 30 days after receiving the release authority the least of the following amounts: (a) if the person requests the provider in writing to pay a specified amount in relation to the release authority—that amount; (c) the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person in complying superannuation plans. > Note 1: Section 288‑95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection. > Note 2: Section 288‑100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority. > Note 3: For reporting obligations on the superannuation provider in these circumstances, see section 390‑65 in Schedule 1 to the Taxation Administration Act 1953. (2) The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person in complying superannuation plans. (3) Section 307‑125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section. (a) your non‑concessional contributions cap for the 2015‑2016 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsection 292‑85(7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 applies after the commencement of this section as if: (d) subsection 292‑85(6) of that Act as so amended had been applied (taking into account paragraph (c) of this subsection) for the purposes of working out your non‑concessional contributions cap for the 2016‑2017 financial year. (2) For the purposes of working out your non‑concessional contributions caps for the 2017‑2018 financial year and the 2018‑2019 financial year, if: (a) your non‑concessional contributions cap for the 2016‑2017 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsections 292‑85(6) and (7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 apply after the commencement of this section as if the amount worked out under subsection 292‑85(5) of that Act as so amended were $380,000. (3) To avoid doubt, this section does not affect your non‑concessional contributions cap for any financial year that ended before 1 July 2017. The tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your non‑concessional contributions (see section 292‑90 of the Income Tax Assessment Act 1997) for the financial year. (2) Subject to section 294‑55, the amendments of Division 294 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Treasury Laws Amendment (2017 Measures No. 2) Act 2017 apply on and after 1 July 2017. Despite sections 294‑30 and 294‑140 of the Income Tax Assessment Act 1997 (which are about when you have excess transfer balance), you do not have excess transfer balance in your transfer balance account on any day in the period of 6 months beginning on 1 July 2017 if: (a) the only transfer balance credits in the account in that period arose under item 1 of the table in subsection 294‑25(1) of that Act (which is about superannuation income streams you have just before 1 July 2017); and (b) the sum of those transfer balance credits exceeds your transfer balance cap, but is less than or equal to $1,700,000; and (c) at the end of the period, the sum of all the transfer balance debits arising in your transfer balance account equals or exceeds the amount of the excess from paragraph (b). (1) Despite subsection 294‑10(2), a transfer balance credit arises under item 4 of the table in subsection 294‑25(1) of the Income Tax Assessment Act 1997 only in relation to a borrowing that arises under a contract entered into on or after 1 July 2017. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2017 is treated as if it arose under a contract entered into before 1 July 2017 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) on 1 July 2017, a transfer balance debit arose in your transfer balance account under item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997; and (b) the sum of all the transfer balance credits that arise in your transfer balance account under item 1 of the table in subsection 294‑25(1) of that Act exceeds the amount that would, apart from this section, be the amount of that debit. (2) Despite column 2 of item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997, the amount of the transfer balance debit is instead equal to the sum worked out under paragraph (1)(b) of this section. 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain > The object of this Subdivision is to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the following legislative changes: (a) the introduction of a transfer balance cap (as a result of Schedule 1 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016); (b) the exclusion of transition to retirement income streams (and similar income streams) from being superannuation income streams in the retirement phase (as a result of Schedule 8 to that Act). (a) starting on the start of the day on which the Bill that became the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 was introduced into the House of Representatives; and (a) at the start of the pre‑commencement period, a CGT asset of a fund is a segregated current pension asset of the fund; and (i) at a time (the cessation time) in the pre‑commencement period, the asset ceases to be a segregated current pension asset of the fund; or (ii) at the start of 1 July 2017 (also the cessation time), the asset ceases to be a segregated current pension asset of the fund because it supports a superannuation income stream covered by subsection 307‑80(3) of the Income Tax Assessment Act 1997; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (b) the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year is greater than nil; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and #### 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑115(3)(a), the fund makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the fund’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Subsection 295‑390(1) of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). > 2016‑17 non‑exempt proportion means 1 minus the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year. #### 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset (i) the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997 in respect of the trust for the 2016‑17 income year; (ii) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year; and (d) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and #### 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑125(3)(a), the trust makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the trust’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Section 295‑400 of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). (a) unless paragraph (b) applies—1 minus the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997; or (b) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage worked out by subtracting the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year from 100%. This Subdivision applies to an entity that is the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust. For the purposes of this Subdivision, an asset is a 30 June 1988 asset of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust if the entity owned it at the end of 30 June 1988. > Note: Section 295‑90 of the Income Tax Assessment Act 1997 treats these assets as having been acquired on 30 June 1988. (1) The first element of the cost base of each 30 June 1988 asset of the entity’s is the greater of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). (2) The first element of the reduced cost base of each 30 June 1988 asset of the entity’s is the lesser of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). the market value of the asset as at the end of 30 June 1988 is the average of the highest and lowest trade prices for identical assets recorded on 30 June 1988 in whichever of the following markets is applicable: (d) if, on that date, there was a State capital city market (other than the Sydney market) that recorded a higher volume of trading than the Sydney market in identical assets—that State capital city market; (2) For the purposes of this section, an asset is taken to have been listed on an Australian stock exchange on 30 June 1988 if, and only if, on that day the asset had the status of having been granted official quotation by a securities exchange within the meaning of the former Securities Industry Act 1980 or the law of a State or Territory corresponding to that former Act. (b) at any time during the period commencing at the time when the shares were acquired and ending at the end of 30 June 1988, the company paid an amount that was not a dividend to the entity in respect of the shares; (b) at any time during the period commencing at the time when the interest or unit was acquired and ending at the end of 30 June 1988, the trustee of the trust paid an amount to the entity in respect of the interest or unit, being: (i) in a case where the entity was exempt from tax for the year of income in which the payment was made—an amount that, if the entity had not been exempt from tax, would not have been the entity’s assessable income; or the cost base to the entity of the interest or unit as at 30 June 1988 is reduced by so much of the amount as is not attributable to a deduction allowed under former Division 10C or 10D of the Income Tax Assessment Act 1936. (1) Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (2) and (3) of this section apply if an entity exercises rights or options as mentioned in that section to acquire: (b) the greater of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (b) the lesser of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (4) The payment referred to in subsection (2) or (3) can include giving property. To the extent that the payment does, use the market value of the property in working out the amount of the payment. (1) A notice given under subsection 82AAT(1A) or (1CB) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑170 of the Income Tax Assessment Act 1997. (2) A notice given under subsection 82AAT(1C) or (1CD) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑180 of the Income Tax Assessment Act 1997. (1) A proportion of the ordinary income and statutory income of a continuously complying fixed interest ADF of an income year that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).  > Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the income year. > Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the income year. (4) A choice for the purposes of the definition of reckoning time in subsection (5) must be made on or before the date of lodgment of the income tax return of the ADF for the income year to which the choice relates, or before a later day allowed by the Commissioner. > continuously complying fixed interest ADF, in relation to an income year (the current year), means a fund that is a fixed interest complying ADF in relation to each of the following years: > current 25 May balance, in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time: (b) subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 September 1989 is to be added to the balance; (b) a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that day, made a deposit with the ADF that consisted wholly or partly of the roll‑over (as defined in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 as in force on that day) of an eligible termination payment as so defined, being an eligible termination payment that included a concessional component (as so defined). > fixed interest complying ADF, in relation to a year of income, means a complying ADF where both of the following conditions are satisfied: (a) not less than 90% of the amount that, apart from this section, would be the assessable income of the ADF of the income year (other than non‑arm’s length income or amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997) consists of any one or more of the following: (ii) any profit arising on the disposal, redemption, cancellation or maturity of a CGT asset referred to in paragraph 295‑85(3)(b) of the Income Tax Assessment Act 1997; (iii) an amount included in assessable income under Division 16E of Part III of the Income Tax Assessment Act 1936 (or would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply); (ii) virtual PST life insurance policies (as defined in the Income Tax Assessment Act 1997) issued by a life insurance company. > original 25 May balance, in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988. > reckoning time, in relation to an ADF in relation to an income year, means the beginning of the income year, or such other time during the income year as the ADF chooses in accordance with subsection (4). (6) This section does not apply to an ADF in relation to an income year unless the whole of the benefit that would accrue to the ADF from the application of this section in relation to the income year has been, or can reasonably expected to be, passed on to eligible depositors. An election made by the trustee of a complying superannuation fund under subsection 279(4) of the Income Tax Assessment Act 1936 that had effect for the income year of the fund in which 30 June 2007 occurs continues to have effect as if it had been made under section 295‑465 of the Income Tax Assessment Act 1997. Subdivisions 295‑I (no‑TFN contributions) and 295‑J (Tax offset for no‑TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006‑2007 income year ends on a day (the end day) after 1 July 2007 as if: (b) the entity’s no‑TFN contributions income for the entity’s 2007‑2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007‑2008 income year if the contributions concerned had been made in the entity’s 2007‑2008 income year. (2) Division 301 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section because you are a member of the fund in the same way as it would apply if the payments were superannuation member benefits paid to you from a complying superannuation fund. For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. Subdivision 301‑F of the Income Tax Assessment Act 1997 applies in relation to income years starting on or after 1 July 2007. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to the following in respect of an income year that starts on or before 1 July 2021: (b) the amendments of the Income Tax Assessment (1997 Act) Regulations 2021 made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023. (a) a superannuation benefit (the trigger benefit) was paid to a person in the 2020‑21 income year or an earlier income year; and (c) the trigger benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; and (2) The Commissioner cannot amend an assessment on the basis that a superannuation benefit paid to the person is a superannuation income stream benefit because of the amendments made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 if: (iii) the superannuation benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (a) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (b) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. (1) The Minister may, by legislative instrument, make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions) that: (a) relate to the amendments or repeals made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023; and (2) Without limiting subsection (1), rules made under this section before the end of the period of 12 months starting on the day that Schedule commences may provide that provisions of that Schedule, or any other Act or instrument, have effect with any modifications prescribed by the rules. Those provisions then have effect as if they were so modified. (2) Division 302 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section after another person’s death, because the other person was a member of that fund, in the same way as it would apply if the payments were superannuation death benefits paid to you from a complying superannuation fund. For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if: (b) just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. (2) For the purposes of Subdivision 82‑B of Division 82, Division 302 and section 303‑5 of the Income Tax Assessment Act 1997, the definition of death benefits dependant in section 302‑195 of that Act applies as if paragraphs (a) and (b) of the definition were replaced with the following paragraphs: (a) a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008 or a person who was formerly such a spouse; or (b) a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008, who is aged less than 18. (ii) a superannuation guarantee payment, a small superannuation account payment, an unclaimed money payment, a superannuation co‑contribution benefit payment or a superannuation annuity payment. (2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you at a time in the period: (i) a condition of release specified in item 107A or 207AA of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; or (ii) a condition of release specified in item 109AA of the table in Schedule 2 to the Retirement Savings Accounts Regulations 1997. (1) This section applies to a superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with section 292‑80B. (2) The superannuation benefit is not assessable income and is not exempt income to the extent that it does not exceed the amount mentioned in subsection (3). (3) The amount is the amount of excess non‑concessional contributions stated in the release authority in accordance with paragraph 292‑80A(3)(a), reduced (but not below zero) by the amount of any superannuation benefit that was not assessable income and not exempt income under a previous operation of subsection (2) in relation to the release authority. (4) The superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3). (a) you have an interest in a FIF (within the meaning of Part XI of the Income Tax Assessment Act 1936, as in force just before the commencement of item 37 of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010) (the paying fund); and (b) Subdivision 305‑B of the Income Tax Assessment Act 1997 applies in relation to the paying fund (see section 305‑55 of that Act); and (c) the paying fund transfers an amount to a complying superannuation fund in respect of you during the deduction year; and (d) you choose under section 305‑80 of the Income Tax Assessment Act 1997 that the amount, or part of the amount, is to be treated as assessable income of the complying superannuation fund; and (e) immediately before the transfer happens, there is a post‑FIF abolition surplus (within the meaning of the Income Tax Assessment Act 1936) for the paying fund in relation to you; and For the purposes of the definition of specified roll‑over amount in the Income Tax Assessment Act 1997, treat the taxable component of a directed termination payment (within the meaning of section 82‑10F) as the element untaxed in the fund of a superannuation benefit that is a roll‑over superannuation benefit. (1) This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007. > Note: This section also applies to an income stream replacing an earlier one because of an involuntary roll‑over (see section 307‑127). (2) Despite subsection 307‑125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows: (a) first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007); (b) next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits. The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit. (3) Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened: (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day; (ba) the holder of the superannuation interest is aged 60 or above on 1 July 2007, if none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day. (a) treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and (b) work out the tax free component of the superannuation interest for the purposes of section 307‑125 of the Income Tax Assessment Act 1997 under subsections (6) and (6A). (i) an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and (ii) the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time; (b) next, work out the unused undeducted purchase price (within the meaning of paragraph (a) of the definition of that term in subsection 27A(1) of the Income Tax Assessment Act 1936 just before the commencement of this section, and disregarding paragraphs (b) and (c) of that definition) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007; (c) next, work out the pre‑July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this section) of the eligible termination payment. (a) at least one superannuation income stream benefit was paid from the superannuation income stream before 1 July 1994; or (b) section 27AAAA of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007) applied to the superannuation income stream just before 1 July 2007; (7) For the purposes of paragraph (6)(c), disregard the value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment. (8) If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as: (b) if 1 or more other events mentioned in subsection (3) happened before the commutation—the time just before the earliest of those events happens. (a) references in that section to the later income stream (in relation to a time, or event happening, before the payment of that involuntary roll‑over superannuation benefit) include references to the earlier income stream; and (b) references in that section to the superannuation interest supporting the later income stream (in relation to a time, or event happening, before the payment of that benefit) include references to the earlier interest. (1) This section applies for the purposes of working out the amount of your total superannuation balance just before 1 July 2017. (2) The transfer balance mentioned in paragraph 307‑230(1)(b) of the Income Tax Assessment Act 1997 just before 1 July 2017 is taken to be equal to: (a) the sum of the transfer balance credits (if any) in your transfer balance account just after the start of 1 July 2017; less (b) the sum of the transfer balance debits (if any) arising in your transfer balance account on 1 July 2017 under item 4 of the table in subsection 294‑80(1) of that Act (about payment splits). (1) Section 307‑231 of the Income Tax Assessment Act 1997 applies in relation to borrowings that arise under contracts entered into on or after 1 July 2018. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2018 is treated as if it arose under a contract entered into before 1 July 2018 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) treat a deduction made under former section 279 of the Income Tax Assessment Act 1936 as having been made under section 295‑465 of the Income Tax Assessment Act 1997 instead; and (b) treat a deduction made under former section 279B of the Income Tax Assessment Act 1936 as having been made under section 295‑470 of the Income Tax Assessment Act 1997 instead. If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007‑2008 income year is, despite subsection 307‑345(1), the total of: (b) the amount by which $140,000 exceeds the upper limit for the 2006‑2007 income year (worked out under section 159SG of that Act). Division 316 of the Income Tax Assessment Act 1997 applies in relation to demutualisations occurring on or after 1 July 2008. If: (a) any assets held by the benefit funds of a life insurance company that is a friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a complying superannuation fund; and (b) the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer; the transfer is disregarded for any purposes of the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936. (1) In working out the amount that a life insurance company can deduct, in respect of life insurance policies that are disability policies (other than continuous disability policies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income. (2) In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection (1) applies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company’s liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320‑85(4) of that Act. If: (2) If the life insurance company wishes to include a part of an approved asset in its virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑87(2) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society establishes a virtual PST in the 2000‑01 income year, the calculation of the transfer values of the company’s virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year. (1) Subsection (3) applies for the purposes of subparagraph (b)(i) of the definition of virtual PST life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 259 of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007. (2) Subsection (3) also applies for the purposes of subparagraph (b)(i) of the definition of complying superannuation/FHSA life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 47 of Schedule 7 to the First Home Saver Accounts (Consequential Amendments) Act 2008. (3) Treat an annuity as having been purchased out of a superannuation lump sum or an employment termination payment, if the annuity was purchased: (b) out of an eligible termination payment (within the meaning of the Income Tax Assessment Act 1997, as in force just before the commencement mentioned in subsection (1) of this section). (2) If the life insurance company wishes to include a part of an approved asset in its segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (a) a life insurance company had a liability before 1 July 2000 under a life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and (c) there is a transfer of the company’s assets to the segregated exempt assets to meet that liability or that part of the liability; (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑105(1) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320‑225 of the Income Tax Assessment Act 1997 in the 2000‑01 income year, the calculation of the transfer values of the company’s segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year. Section 322‑25 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Part VC of the Insurance Act 1973 after 17 October 2008. 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you > new Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force after the commencement of this section. > old Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. > STS taxpayer means an STS taxpayer within the meaning of Division 328 of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. #### 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years (1) This section applies for the purpose of working out whether you are a small business entity (other than because of subsection 328‑110(4) of the Income Tax Assessment Act 1997) for the 2007‑08 or 2008‑09 income year. (2) You work out your aggregated turnover for the 2005‑06 or 2006‑07 income year as if the amendments made by Schedule 1 to the Tax Laws Amendment (Small Business) Act 2007 had been in force in relation to that year. (a) your aggregated turnover for the 2005‑06 income year (worked out in accordance with subsection (2)) is $2 million or more; but (b) your STS group turnover for that year (worked out under Subdivision 328‑F of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section) is less than $2 million. (2) The following provisions apply as if you are a small business entity for the income year in which you are winding up the business: #### 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you (1) For the purpose of working out whether you are a small business entity for the 2007‑08, 2008‑09, 2009‑10 or 2010‑11 income year (each a relevant income year) for the purposes of a provision to which subsection (3) applies: (2) An entity (the first entity) controls a discretionary trust for a relevant income year if, for any of the 4 income years (a previous income year) before that year: (a) if the previous income year is before the 2007‑08 income year—the trustee of the trust made a distribution of $100,000 or more to the first entity, any of its affiliates, or the first entity and any of its affiliates; or (i) the trustee of the trust paid to, or applied for the benefit of, the first entity, any of the first entity’s affiliates, or the first entity and any of its affiliates, any of the income or capital of the trust; and (ii) the percentage (the control percentage) of the income or capital paid or applied is at least 40% of the total amount of income or capital paid or applied by the trustee for that year. (1) This section sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (2) This section also sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (3) Any ordinary income that, apart from paragraph 328‑105(1)(a) of the Income Tax Assessment Act 1997 (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have derived before the changeover year (while you were using the STS accounting method) and you have not included in your assessable income because you have not received it is included in your assessable income for the changeover year. (4) Any general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, that, apart from paragraph 328‑105(1)(b) of that Act (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have incurred before the changeover year (while you were using the STS accounting method) and that you have not deducted because you have not paid them can be deducted for the changeover year. (b) for any later income year for which you are a small business entity but only if you used the STS accounting method for the income year before that later year. > Note: Example: You are a small business entity for the 2007‑08 and 2008‑09 income years and you continue to use the STS accounting method for those years. You are not a small business entity for the 2009‑10 income year so you cannot continue to use the STS accounting method for that year. Because you cannot use the STS accounting method for the 2009‑10 income year, you will not be able to use it again for a later income year even if you are a small business entity for that later year. In sections 328‑115 and 328‑120, STS accounting method means the accounting method that was required by the Income Tax Assessment Act 1997 to be used by STS taxpayers for the 2004‑05 income year. (b) you made a choice under subsection 328‑175(3) of old Subdivision 328‑D in relation to a depreciating asset you use to carry on a primary production business and for which you could deduct amounts under Subdivision 40‑F or 40‑G of the Income Tax Assessment Act 1997. (2) In determining whether you can choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997 in an increased access year, disregard subsection 328‑175(10) of that Act. (3) In applying paragraph 328‑175(10)(b) of that Act for the purpose of determining whether you can choose to use that Subdivision in any income year after the increased access years, disregard: (4) Paragraph 328‑180(1)(b) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that paragraph to $1,000: (i) first used the asset, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (i) first used the asset, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (i) first used the asset, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, on or after 1 July 2023 and on or before 30 June 2026. (a) a reference in that paragraph to the end of the income year in which you start to use the asset, or have it installed ready for use, for a taxable purpose were a reference to the earlier of: if: (i) first used the asset, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021. (5) Paragraph 328‑180(2)(a) or (3)(a) of the Income Tax Assessment Act 1997 applies to an amount included in the second element of the cost of an asset as if a reference in that paragraph to $1,000: (5A) For the purposes of determining whether, under subsection 328‑180(2) of the Income Tax Assessment Act 1997, you can deduct, for an income year (the current year), the taxable purpose proportion of an amount included in the second element of the cost of an asset, disregard paragraph (b) of that subsection if: (2) For the purposes of determining whether subsection 328‑180(1) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (b) of that subsection (which sets a limit of $1,000 on the cost of the asset) if, in the period beginning at the 2020 budget time and ending on 30 June 2023, you: (3) For the purposes of determining whether subsection 328‑180(2) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (a) of that subsection (which sets a limit of $1,000 on the amount) if the amount is included in the second element of the cost of the asset at any time in the period beginning at the 2020 budget time and ending on 30 June 2023. (4) In applying paragraph 328‑180(3)(a) of the Income Tax Assessment Act 1997 to an asset, disregard an amount included in the second element of the cost of the asset if the amount is deducted under subsection 328‑180(2) of that Act, as modified by subsection (3) of this section. (5) Section 328‑210 of the Income Tax Assessment Act 1997 applies as if the words “less than $1,000 but” in subsection (1) were disregarded, in relation to a deduction for an income year that ends: Subsection 328‑190(2) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that subsection to 15% were a reference to 57.5% if you are covered by section 40‑125 for the asset (which is about backing business investment). (1) A depreciating asset of yours that had been allocated to your general STS pool is treated as being allocated to your general small business pool. (2) A depreciating asset of yours that had been allocated to your long life STS pool is treated as being allocated to your long life small business pool. (3) If you made a choice, under subsection 328‑185(5) of old Subdivision 328‑D, not to have a depreciating asset allocated to your long life STS pool, the choice has effect for the purposes of subsection 328‑185(5) of new Subdivision 328‑D. (1) This section applies if a depreciating asset of yours is treated as being allocated to your general small business pool or long life small business pool under section 328‑185. (2) The opening pool balance of your general small business pool or long life small business pool for the 2007‑08 income year is taken to be the closing pool balance of your general STS pool or long life STS pool, as the case requires, for the 2006‑07 income year, reduced or increased by any adjustment required under section 328‑225 of new Subdivision 328‑D (about change in the business use of an asset). (a) you were not an STS taxpayer for the 2006‑07 income year (because you stopped being an STS taxpayer before that time); but (b) you are a small business entity for the 2007‑08 income year or a later income year and you choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets for that income year; the opening pool balance of your general small business pool or long life small business pool includes the sum of the taxable purpose proportions of the adjustable values of depreciating assets allocated to the pool under subsection 328‑185(3) of new Subdivision 328‑D for that year. (1) This section applies for the purposes of applying Subdivision 328‑D of the Income Tax Assessment Act 1997 for the 2012‑13 income year and later income years. (2) A depreciating asset that had been allocated to your long life small business pool is treated as being allocated to your general small business pool. (a) the closing pool balance of your general small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under section 328‑225 of that Act; and (b) the closing pool balance of your long life small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under that section. (1) This section applies if you chose to stop being an STS taxpayer for the 2005‑06 income year or the 2006‑07 income year. (2) You cannot choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets until at least 5 years after the income year for which you chose to stop being an STS taxpayer. > Note: Subdivision 328‑D of the Income Tax Assessment Act 1997 continues to apply to depreciating assets that have been allocated to your small business pools even if you are not a small business entity, or do not choose to use that Subdivision, for an income year: see section 328‑220 of that Subdivision. (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct 20% of particular expenditure for your 2023‑24 income year if: (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (d) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑450 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (6) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (ii) if the provider is a registered body of a kind listed in paragraph (2)(b), (c) or (d)—the training is within the provider’s scope of registration for that kind of registered body; and (d) each enrolment, or arrangement, for the provision of the training is made or entered into at or after 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022; and > Note: Paragraphs (b) and (c) mean this section will not apply to expenditure for on‑the‑job training or training provided by you in house. (a) a registered higher education provider (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); (b) a NVR registered training organisation (within the meaning of the National Vocational Education and Training Regulator Act 2011); (c) a registered education and training organisation (within the meaning of the Education and Training Reform Act 2006 (Vic.)); (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct for your 2023‑24 income year an amount that is equal to the sum of: (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (3) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑460 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (4) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (b) you incur the expenditure in the period starting at 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022 and ending at the end of: (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (4) For the purposes of paragraphs (1)(c) and (2)(c), in working out whether you can deduct an amount of expenditure on a depreciating asset, assume that: (b) throughout that effective life, you will use the asset for a taxable purpose to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose. (a) 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑470(1) or (3) applies in relation to the income year; and > Note: The deduction relates to the period of 1 July 2023 to 30 June 2024. An entity may have deducted an amount under paragraph (a) for a previous income year if the entity has a substituted accounting period. (2) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑470 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (3) Sections 8‑10, 40‑215 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (c) you start to use the asset, or have it installed ready for use, for any purpose after 30 June 2023 but before 1 July 2024; and (d) you start to use the asset, or have it installed ready for use, for a taxable purpose at a time (the start time) that is: (e) you are a small business entity, or an entity covered by subsection (4), for the income year that includes the start time; and (h) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) a new reasonably comparable depreciating asset that uses a fossil fuel (other than a use of which that is merely incidental) is available in the market at the start time; (ii) if the asset is being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than the other asset; (iii) if the asset is not being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than a new reasonably comparable depreciating asset that is available in the market at the start time; or (i) a depreciating asset (other than an asset excluded under subsection (6)) that uses electricity, or energy that is generated from a renewable source, to be more energy efficient; (iv) the use of electricity, or energy that is generated from a renewable source, by another depreciating asset to be monitored. (a) the amount is included in the second element of a depreciating asset’s cost under paragraph 40‑190(2)(a) of the Income Tax Assessment Act 1997; and (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (d) you are a small business entity, or an entity covered by subsection (4), for the income year in which the expenditure is incurred; and (i) if the asset could use a fossil fuel (other than a use of which that is merely incidental)—the asset to only use electricity, or energy that is generated from a renewable source; (ii) if the asset uses electricity, or energy that is generated from a renewable source—the asset to be more energy efficient; (g) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) For the purposes of paragraph (1)(b) or (3)(b), in working out whether you can deduct an amount of expenditure assume that: (i) for the purposes of paragraph (1)(b)—to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose; or (ii) for the purposes of paragraph (3)(b)—to the same extent as you use it for a taxable purpose in the income year in which the expenditure is incurred. (b) expenditure (other than expenditure referred to in subparagraph (3)(e)(i)) on an asset that can use a fossil fuel (other than a use of which that is merely incidental); (c) an asset that solely or predominantly generates electricity from a renewable source (for example, photovoltaic cells) or expenditure on such an asset; (d) an asset, or expenditure, being capital works for which you can deduct an amount under Division 43 of the Income Tax Assessment Act 1997; > Note: Subsections (1) and (3) also do not apply to an item of trading stock because such an asset is not a depreciating asset: see section 40‑30 of the Income Tax Assessment Act 1997. A reference in each of the following provisions of the Income Tax Assessment Act 1997 to a registration under section 27A of the Industry Research and Development Act 1986 includes a reference to a registration under former section 39J of that Act: (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) the R&D entity cannot deduct an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from: (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D entity could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:22pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the R&D entity is taken to be able to deduct under subsection 355‑315(2) of the new Act that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the R&D entity’s assessable income for the event year under subsection 355‑315(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 for the asset, the R&D entity is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑446 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the R&D entity is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑465 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: Section 355‑315 of the new Act would otherwise apply for the event in a case where the R&D entity had new law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by an R&D partnership; and (i) the partner can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the partner chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D partnership could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the partner is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:21.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D entity</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D partnership</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the partner is taken to be able to deduct under subsection 355‑525(2) of the new Act the partner’s proportion of that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the partner’s assessable income for the event year under subsection 355‑525(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partner’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if one or more partners (including the partner) in the R&D partnership is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset, the partner is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑448 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the partner is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑467 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s deductions under section 355‑520 of the new Act mentioned in subsection (4A) of this section. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the partner for the event, do so apply to the partner for the event. > Note 1: Section 355‑525 of the new Act would otherwise apply for the event in a case where the partner had new law deductions. Item 7 of the table in subsection 57‑110(2) in Schedule 2D to the Income Tax Assessment Act 1936 applies as if the deduction rules set out in the final column of that item also included former sections 73BA and 73BH of the Income Tax Assessment Act 1936. For the purposes of step 1 of the method statement in subsection 355‑415(2) of the Income Tax Assessment Act 1997, also disregard amounts that have already been taken into account under former subsection 73B(14AA) of the Income Tax Assessment Act 1936 for the R&D entity, the grouped entity and the R&D activities for an earlier income year. (1) This section applies if, apart from former paragraph 73B(10)(a) of the Income Tax Assessment Act 1936, an eligible company could deduct advance R and D expenditure in one or more income years commencing on or after 1 July 2011. > Note: That deduction would be under former section 73B of that Act as that former section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (a) apart from Subdivision H (prepaid expenditure) of Division 3 of Part III of the Income Tax Assessment Act 1936, an eligible company can deduct an amount under former section 73B, 73BA, 73BH, 73QA, 73QB or 73Y of that Act for an income year commencing before 1 July 2011; and (c) apart from former paragraph 73B(10)(a) of that Act, the eligible company could deduct an amount, as a result of that application of that Subdivision, for an income year commencing on or after 1 July 2011. > Note: That deduction would be under that Act as it applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (3) Former paragraph 73B(10)(a) of that Act is taken to apply to those income years commencing on or after 1 July 2011 as if the reference in that former paragraph to section 39J of the Industry Research and Development Act 1986 were a reference to section 27A of that Act. (4) An expression used in this section that is also used in former section 73B of the Income Tax Assessment Act 1936 has the same meaning in this section as it has in that former section. This Subdivision applies to core technology (within the meaning of former section 73B of the Income Tax Assessment Act 1936) if: (a) you incurred core technology expenditure (within the meaning of that former section) in an income year commencing before 1 July 2011 in relation to the core technology under one or more contracts entered into at or after the time referred to in former subsection 73B(12) of that Act; and (b) that expenditure (the undeducted expenditure) cannot be deducted for the last income year commencing before 1 July 2011. (1) This section applies for the purposes of Division 40 of the Income Tax Assessment Act 1997, other than sections 40‑292 and 40‑293 of that Act, if the core technology (the asset) is a depreciating asset. (2) Disregard this section, including its effect on the amount you can deduct under section 40‑25 of that Act for the asset, for the purposes of working out: (3) The asset’s opening adjustable value for the first income year that commences on or after 1 July 2011 (the first new income year) is equal to the amount of the undeducted expenditure. (4) Subsection 40‑75(2) of the Income Tax Assessment Act 1997 applies to the asset as if the first new income year were a change year (within the meaning of that subsection). If the core technology is not a depreciating asset, you can deduct the undeducted expenditure in equal proportions over a period of 5 income years starting in the first income year commencing on or after 1 July 2011. To work out the film component (if any) of your tax loss for the 1997‑98 income year or a later income year, apply former section 375‑805 of the Income Tax Assessment Act 1997. If you incurred a film loss for the purposes of former section 79F (Film losses of 1989‑90 to 1996‑97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989‑90 to 1996‑97 income years, that film loss is the film component of your tax loss for that income year. (1) To work out your film loss (if any) for the purposes of the Income Tax Assessment Act 1997 for the 1989‑90 or a later income year, apply former section 375‑810 of that Act. (2) You can deduct in the 1997‑98 or a later income year your film loss for any of the 1989‑90 to 1996‑97 income years only to the extent that it has not already been deducted. (1) Division 392 of the Income Tax Assessment Act 1997 applies to assessments for the 1998‑99 income year and later income years. (a) it had applied to your assessment for each income year before the 1998‑99 income year for which Division 16 of Part III of the Income Tax Assessment Act 1936 applied in relation to your income; and (b) you had carried on a primary production business during each income year before the 1998‑99 income year when you carried on a business of primary production; and (c) for each income year before the 1998‑99 income year you had a basic taxable income equal to your taxable income for the income year for the purposes of Division 16 of Part III of the Income Tax Assessment Act 1936. > Note: Section 149A of the Income Tax Assessment Act 1936 identifies what your taxable income for an income year is for the purposes of Division 16 of Part III of that Act. Division 392 of the Income Tax Assessment Act 1997 does not apply to your assessment for the 1998‑99 income year or a later income year if you made an election under section 158A (Election that Division not apply) of the Income Tax Assessment Act 1936 relating to an income year before the 1998‑99 income year. 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 A reference in Division 393 of the Income Tax Assessment Act 1997 to a deduction under section 393‑5 of that Act for making a farm management deposit is taken to include a reference to a deduction under section 393‑10 in Schedule 2G to the Income Tax Assessment Act 1936, as in force just before the commencement of this section, if the deposit was made before the 2010‑11 income year. #### 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 (b) the deposit was made with an FMD provider as a result of a request to which section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, applied; the unrecouped FMD deduction in respect of the deposit at that time is equal to the amount of the unrecouped deduction (within the meaning of the former subsection 159GA(3) of the Income Tax Assessment Act 1936) in respect of the deposit immediately before it ceased to be a deposit under the Loan (Income Equalization Deposits) Act 1976. > Note: This means that the unrecouped deduction relating to the deposit under the Loan (Income Equalization Deposits) Act 1976 continues to apply (by becoming an unrecouped FMD deduction) when the deposit is transferred to an FMD provider as a farm management deposit. The Loan (Income Equalization Deposits) Act 1976 was repealed on 22 February 2005. If a beneficiary of a trust was covered by paragraph (c) of the definition of primary producer in section 393‑25 in Schedule 2G to the Income Tax Assessment Act 1936 in the 2009‑10 income year, treat subsection 393‑25(3) of the Income Tax Assessment Act 1997 as having applied to the beneficiary for the purpose of determining the maximum number of choices that the trustee may make under subsection 393‑27(2) of that Act for the 2010‑11 income year. (a) a farm management deposit of an owner was unclaimed moneys for the purposes of section 69 of the Banking Act 1959; and (2) For the purpose of subsection 393‑10(1) of the Income Tax Assessment Act, treat the repaid unclaimed moneys as a repayment of the deposit of the owner. (3) To avoid doubt, the payment of unclaimed moneys to the Commonwealth under section 69 of the Banking Act 1959 is not a repayment of the deposit of the owner for the purposes of Division 393 of the Income Tax Assessment Act 1997. 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 #### 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 If a farm management deposit was made with an FMD provider as a result of a request under section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, then: (a) subsections 393‑40(1) to (4) of the Income Tax Assessment Act 1997 apply as if the day the deposit was made was the day on which the deposit was originally made under the Loan (Income Equalization Deposits) Act 1976; and (1) A copyright collecting society to which section 51‑43 of the Income Tax Assessment Act 1997 applies, may elect that, from 1 July 2004, the section apply to all ordinary income, and statutory income, collected or derived by the society on or after 1 July 2004. Division 420 of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division. Subdivision 615‑C of the Income Tax Assessment Act 1997 applies to you with the modifications set out in this Subdivision if you chose to obtain a roll‑over involving \*shares or units that: (b) were your trading stock, or revenue assets, at the time immediately before that disposal, redemption or cancellation. (1) Disregard subparagraph 615‑45(a)(ii), and paragraph 615‑45(b), of the Income Tax Assessment Act 1997 if the roll‑over relates to \*shares that were disposed of, redeemed or cancelled. (2) For each of the \*shares in the interposed company that you acquired in return for those of your shares or units in the original entity that were your \*trading stock at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  (2) For the purpose of calculating any profit or loss on a future disposal, cessation of ownership, or other realisation of a \*share in the interposed company that you acquired in return for those of your shares or units in the original entity that were \*revenue assets at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  Subdivision 620‑A of the Income Tax Assessment Act 1997 applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. (1) Part 3‑90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Act (No. 1) 2002 and amended by: (2) Section 713‑50 of the Income Tax Assessment Act 1997 (about factors to consider in determining destination of distribution by non‑fixed trust) applies for the purposes of this Part in the same way as it applies for the purposes of Part 3‑90 of that Act. ### Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly‑owned subsidiary of the entity (the future head company) that became the head company of the group; or (ii) at some time during that period, the entity was a wholly‑owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (ii) it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (1) If a group is a transitional group, its head company may, subject to subsection (3), choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (3) If the choice is to be made after the end of the period mentioned in paragraph (2)(a) and before the end of the day mentioned in paragraph (2)(b), it cannot be made unless each entity in relation to which the conditions in subsection (5) are satisfied has agreed to it being made. (a) the entity (the leaving entity) ceased to be a subsidiary member of the group before the choice was made (in a subsection (3) case) or before the revocation took place (in a subsection (4) case); and (b) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; and (c) the asset had become that of the head company because that section applied when a chosen transitional entity (whether or not the same entity as the leaving entity) became a subsidiary member. Section 716‑855 applies for the purposes of this Division in the same way as that section applies for the purposes of Part 3‑90 of the Income Tax Assessment Act 1997. is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705‑B of that Act and with this Division. 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity Section 701‑10 (cost to head company of assets of joining entity) and subsection 701‑35(4) (setting value of trading stock at tax‑neutral amount) of the Income Tax Assessment Act 1997 do not apply to the assets of a chosen transitional entity. > Note: The fact that the head company inherits the entity’s history under section 701‑5 of that Act when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time. #### 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities (2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non‑chosen subsidiary) is worked out in a special way. (b) for each sub‑group (see subsection (6)) that exists in relation to the non‑chosen subsidiary—the sub‑group’s notional allocable cost amount (see subsection(5)) for the non‑chosen subsidiary. (4) The head company adjusted allocable amount for the non‑chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if; (b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of head company’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub‑group in relation to the non‑chosen subsidiary. (5) For each sub‑group that exists in relation to the non‑chosen subsidiary, there is a sub‑group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non‑chosen subsidiary if: (a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non‑chosen subsidiary and the entities comprising the sub‑group; and (c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub‑group membership interests (see subsection (6)) in relation to the sub‑group, and any such entity held those membership interests during the period when it actually held them; and (d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of chosen transitional entity’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub‑group. (6) If a chosen transitional entity holds membership interests in a non‑chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non‑chosen subsidiary: (a) the chosen transitional entity and each interposed non‑chosen subsidiary comprise a sub‑group in relation to the non‑chosen subsidiary (unless the non‑chosen subsidiary is included in a sub‑group in relation to another non‑chosen subsidiary); and (i) the membership interests that the chosen transitional entity holds directly in the non‑chosen subsidiary or in any of the interposed non‑chosen subsidiaries; (ii) the membership interests that each interposed non‑chosen subsidiary holds directly in the non‑chosen subsidiary or in any of the other interposed non‑chosen subsidiaries. #### 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities If any provision of the Income Tax Assessment Act 1997 would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply. > Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred. (1) This section has effect for the purposes of applying section 705‑70 (step 2 of allocable cost amount) of the Income Tax Assessment Act 1997 in relation to a transitional entity. (2) In spite of subsection 705‑70(1A) of that Act, if the amount of an accounting liability of the transitional entity would be different when it becomes an accounting liability of the transitional group, that difference is not taken into account in working out the amount of the liability. #### 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different (a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset (the roll‑over asset) for which there was: (ii) roll‑over relief under section 40‑340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and (i) became an asset of the head company when the transitional group came into existence because subsection 701‑1(1) (the single entity rule) of that Act applies; or differs at that time from what it would have been if the act, transaction or event that gave rise to the CGT event had not occurred in relation to the roll‑over asset; then the provisions mentioned in subsection (2) apply as if the act, transaction or event had not occurred in relation to the roll‑over asset. (a) the act, transaction or event mentioned in subsection (1) happened before a demerger and in connection with the demerger; and (b) before the transitional group came into existence, at least one of the following entities ceased to be a member of the demerger group because of the demerger: (i) the originating company in relation to the roll‑over, or the transferor in relation to the roll‑over relief, was a foreign resident; and (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as a transitional foreign‑held subsidiary of the group. #### 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets (1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied. (2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset. (a) the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and (b) former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset. (4) The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group. (6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses. #### 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets (b) just before the transitional group came into existence, the entity that became the head company held a pre‑CGT asset; and (d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre‑CGT asset and is held by the head company only because the entity is taken by subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company. (2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence. #### 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity (1) This section provides for an addition to the step 1 amount for working out under section 711‑20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity) that ceases to be a subsidiary member of the transitional group at a time (the leaving time), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701‑1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount for paragraph</span><span> </span><span>(2)(c)</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">If, because of the circumstances described in paragraphs</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(a) and (b):</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">The amount is:</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:180.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following provisions applied to the entity:</span></p><p class="Tablea"><span>(a) former section</span><span> </span><span>61A of the </span><span style="font-style:italic">Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(b) former Subdivision</span><span> </span><span>57</span><span>‑</span><span>I in Schedule</span><span> </span><span>2D to the</span><span style="font-style:italic"> Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(c) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(4) of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td><td style="width:148.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the amount treated as being the cost of the asset under that provision; and</span></p><p class="Tablea"><span>(b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>2</span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following subsections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span><span> applied to the entity:</span></p><p class="Tablea"><span>(a) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(5);</span></p><p class="Tablea"><span>(b) 58</span><span>‑</span><span>70(3)</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The amount treated as being the cost, or the first element of the cost, of the asset under that subsection</span></p></td></tr></tbody></table> ``` (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997, as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="4" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amounts and provisions for different dates of acquisition</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Date of the acquisition</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Amount</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Provision of Division</span><span style="font-weight:bold"> </span><span style="font-weight:bold">58 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> applying to the acquisition and the working out of the amount</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:76.7pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>160</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>220</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>After 30</span><span> </span><span>June 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>First element of the cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subsection</span><span> </span><span>58</span><span>‑</span><span>70(5)</span></p></td></tr></tbody></table> ``` > Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. > Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and ### Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: #### 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70‑45 to 70‑70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420‑51 to 420‑58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (a) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority‑owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority‑owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority‑owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority‑owned entity became a subsidiary member of the group, there was roll‑over relief under section 40‑340 of the Income Tax Assessment Act 1997. (a) while the asset is, because subsection 701‑1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, its tax cost setting amount is taken to be equal to the continuing majority‑owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711‑30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997. (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset becomes that of an entity (a new asset holder) other than the head company because subsection 701‑1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder) acquiring some or all of the membership interests in the new asset holder; and (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset is acquired by another entity (a new asset holder) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll‑over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value asset just before the acquisition; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 #### 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 (b) members of the consolidated group or the MEC group mentioned in subsection 104‑500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701‑1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701‑1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (3) If this section applies, neither subsection 104‑500(4) nor subsection 104‑500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year. ### Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C‑B); and (b) modifies certain rules in Part 3‑90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C‑C). > Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719‑2 and 719‑10 of this Act). 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership #### 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(ii) of that Act (see subsection 719‑2(3) of this Act). (b) a trust (a non‑resident trust) that does not meet the requirements in any item of the table in section 703‑25 of the Income Tax Assessment Act 1997. (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non‑resident company or a non‑resident trust; or Test entity must be a subsidiary member on assumption that non‑resident companies and non‑resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non‑resident company or non‑resident trust were a subsidiary member of the group. (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv). #### 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(iii) of that Act (see subsection 719‑2(3) of this Act). (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C‑10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3). If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C‑10 are met; and (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (ii) an entity that is a transitional foreign‑held indirect subsidiary of the group because of another application of this paragraph; Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign‑held indirect subsidiary would need to have satisfied the set of requirements in either section 701C‑10 or 701C‑15 (1) This Subdivision applies if an entity (the transitional foreign‑held joining entity) that is a transitional foreign‑held subsidiary or a transitional foreign‑held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time) the group comes into existence. (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign‑held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign‑held indirect subsidiary that becomes a subsidiary member at that time takes account of this. (a) section 701‑10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); apply, for the purposes of setting the tax cost of an asset of the transitional foreign‑held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign‑held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. > Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign‑held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign‑held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign‑held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign‑held subsidiary and the other entity. > Note 2: If the transitional foreign‑held joining entity is a transitional foreign‑held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705‑A of the Income Tax Assessment Act 1997, in its application in accordance with Subdivision 705‑B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company. Subsection 701‑35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax‑neutral amount) does not apply to the assets of the transitional foreign‑held joining entity if it is a transitional foreign‑held subsidiary. Section 701‑15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: (a) this section applies to each membership interest in the transitional foreign‑held subsidiary that is held by an entity (an eligible non‑resident) of a kind mentioned in subparagraph 701C‑20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign‑held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701‑1(2) of the Income Tax Assessment Act 1997 applies to the eligible non‑resident in the same way as it applies to the head company. Section 711‑5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: > Note: If the leaving entity is a transitional foreign‑held subsidiary (within the meaning of section 701C‑20 of the Income Tax (Transitional Provisions) Act 1997), this Division will, in accordance with subsection 701‑15(4) of this Act (see section 701C‑40 of the first‑mentioned Act), apply to membership interests that an eligible non‑resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity. (1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707‑C of the Income Tax Assessment Act 1997. (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period. (1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if: (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (d) the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997. (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: (1) The head company of a consolidated group may make a choice in the approved form to apply section 701D‑10 to another entity. (2) However, the head company cannot make that choice if subsection 701D‑10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (a) an asset of the head company because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701‑55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40‑77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40‑77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40‑285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount. (b) after the asset became an asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). > Note: The final entity will be different from the head company if an entity (the leaving entity) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40‑285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. > Note: The final entity will be entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701‑5 (the entry history rule) of that Act and perhaps also section 701‑40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity) became a subsidiary member of the group; and It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). > Note: In some cases, section 705‑47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40‑285(3) of this Act. If: (b) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and subsection 40‑285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701‑10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997. > Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997. (1) For the purposes of Part 3‑90 of the Income Tax Assessment Act 1997, this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960‑G of that Act whether the interest or right is a membership interest of the entity in the other entity. > Note: Under Subdivision 960‑G of the Income Tax Assessment Act 1997, a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001) apply to transactions in relation to the interest or right at the relevant time. Despite the amendments of section 703‑35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) If an entity (the joining entity) to which section 40‑75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time), this Subdivision applies in relation to: (ii) became assets of the head company of the group at the joining time because of section 701‑1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure. (1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). (2) If the joining entity could not deduct an amount under Subdivision 40‑B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701‑55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40‑35, 40‑37, 40‑40 or 40‑43 treated the joining entity as holding a notional asset. > Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705‑30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. (a) deductions under former Subdivision 330‑A, 330‑C or 330‑H of the Income Tax Assessment Act 1997, or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated an entity as holding because of the expenditure. (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); > Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40‑75(4) of this Act, but may have been reset since under Subdivision 40‑B of the Income Tax Assessment Act 1997. > Note 2: The effective life of a notional asset is specified by whichever one of sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act is relevant to the notional asset. (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (9) Section 705‑55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705‑45 of that Act. > Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705‑40 of the Income Tax Assessment Act 1997. (a) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701‑5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. > Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705‑305(3). (ii) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707‑A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member. 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value #### 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707‑320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor) other than the real loss‑maker mentioned in subsection 707‑315(1) of that Act for the bundle; and (b) both the real loss‑maker and the value donor became members of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (ca) neither the real loss‑maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (ii) a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (ii) section 713‑540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (2) It must have been possible for the real loss‑maker to have transferred the loss to the value donor under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss‑maker at the initial transfer time the amount worked out using the formula:  > Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707‑327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss‑maker to the transferee. > total of real loss‑maker’s non‑foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss‑makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) included in a bundle of losses: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. #### 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value (1) This section affects the calculation of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707‑325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936, in the bundle). > Note: This section does not affect the calculation of the real loss‑maker’s modified market value for other purposes (such as the real loss‑maker being a value donor for the purposes of another application of section 707‑325 of this Act). (3) One condition is that the event was an injection of capital directly into the real loss‑maker by the value donor mentioned in section 707‑325 of this Act. (c) that would have caused subsection 707‑325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss‑maker’s modified market value (even if no other events described in subsection 707‑325(4) of that Act had occurred), apart from this section. (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss‑maker (whether or not the event also involved either the value donor or the real loss‑maker); or (1) This section has effect for the purposes of working out under Subdivision 707‑C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707‑325, as if there were added to the modified market value of the real loss‑maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (c) the loss is not a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707‑A of that Act at the initial transfer time had the company: > Note: This section has effect even if the amount added to the real loss‑maker’s modified market value under section 707‑325 is nil because the value donor’s modified market value is nil. (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707‑325, as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (4) If the transferee mentioned in subsection 707‑325(1) chooses, sections 707‑310, 707‑335 (except paragraph 707‑335(2)(a)) and 707‑340 of the Income Tax Assessment Act 1997 (and subsections 707‑315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: > Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707‑325(1)(d) and (e) and subsection 707‑325(2) in an application of section 707‑325 separate from the application of that section mentioned in paragraph (1)(a) of this section. > Note: This means that a loss that provided a basis for section 707‑325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. (b) in connection with the requirement that it must have been possible for a company (the notional transferor) to transfer to another company (the notional transferee) for an income year a loss under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997. (b) ends immediately after the initial transfer time mentioned in subsection 707‑320(1) of the Income Tax Assessment Act 1997. > Note: For the purposes of identifying the trial year using the definition in section 707‑120 of the Income Tax Assessment Act 1997, the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time. (1) Subsection (3) of this section affects the calculation, under section 707‑325 of the Income Tax Assessment Act 1997 and section 707‑325 of this Act, of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (the formation time) the group became a consolidated group; and (b) the provisions described in subsection 707‑327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707‑327(1)(b) and (c) of this Act as if the bundle included the loss; and (d) subsection 707‑325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707‑325(1) of this Act chooses that this section apply in relation to the real loss‑maker. (2) Section 707‑325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. (3) Disregard for the purposes of subsection 707‑325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707‑325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or > Note: Disregarding such an event could have a direct or indirect effect on the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss‑maker’s modified market value calculated under section 707‑325 of the Income Tax Assessment Act 1997, if the real loss‑maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707‑325 of this Act to add an amount to the real loss‑maker’s modified market value for those purposes. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) that: (b) was transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from an entity other than the real loss‑maker. (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997. Disregard an event that is described in subsection 707‑325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707‑325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004. (1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss‑maker) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time) the transferee became the head company of a consolidated group; and (ii) the conditions in one or more of paragraphs 165‑15(1)(a), (b) and (c) did not exist in relation to the real loss‑maker; and (da) the real loss‑maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non‑transferred losses) of the same sort that the transferee made without a transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non‑transferred losses). (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. <table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Limit on utilising the losses</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For this income year:</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the losses that the transferee may utilise cannot exceed:</span></p></td></tr></thead><tbody><tr><td style="width:20.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:120.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The first income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span style="font-size:8pt; vertical-align:2pt">1</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The second income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) </span><span style="font-size:8pt; vertical-align:2pt">2</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the amount of the losses utilised for the income year mentioned in item</span><span> </span><span>1</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The third income year ending after the initial transfer time, or a later income year</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time</span></p></td></tr></tbody></table> ``` (4) Subdivision 707‑C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707‑A of that Act. > Note: This has 2 effects. First, Subdivision 707‑C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707‑A of that Act). (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). (7) This section does not limit the transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company. In working out when a choice may be made under subsection 707‑325(5), 707‑327(5), 707‑328A(4) or 707‑350(5), ignore losses to which section 713‑535 of the Income Tax Assessment Act 1997 applies. > Note: That section deals with losses transferred under Subdivision 707‑A of that Act from certain wholly‑owned subsidiaries of life insurance companies that are members of a consolidated group. Section 707‑405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act. (1) This section reduces the adjustable value of a notional asset that section 40‑35, 40‑37, 40‑38, 40‑40 or 40‑43 treats the head company of a consolidated group as holding, if: (b) that section treats the leaving entity as holding a notional asset because of section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997. > Note: Section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time. The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences. (1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event) happening involving an entity (the originating entity) and another entity (the recipient entity) if: (a) the event occurs in connection with a life insurance company (the member life insurance company) becoming a member of a consolidated group; and (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest) in a company or in another trust. (a) a life insurance company transfers an asset (also the original asset) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320‑200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset) to its segregated exempt assets where, apart from this Subdivision, section 320‑255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event) is made in connection with the life insurance company (also the member life insurance company) becoming a member of a consolidated group. (1) This Subdivision applies only if the originating entity (for a section 713‑505 case) or the life insurance company (for a section 713‑510 case) chooses that it apply. (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713‑510 of the Income Tax Assessment Act 1997; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713‑510 of the Income Tax Assessment Act 1997; and (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs. This Act, and the Income Tax Assessment Act 1997, apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group. (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain) that the originating entity would have made as a result of the deferral event is disregarded; and (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount) under paragraph 320‑15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (1) This section operates if, after the deferral event happens, another event (the new event) happens where the new event is: (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (i) the original asset being transferred to or from the company’s virtual PST under section 320‑180, 320‑185 or 320‑195 of the Income Tax Assessment Act 1997; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320‑235, 320‑240 or 320‑250 of that Act; or (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. > Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713‑505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (1) For a section 713‑505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713‑535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: (a) an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group at a time (the leaving time); and (b) but for the cessation of membership and section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision. Sections 716‑340 and 716‑345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. <table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:345.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Extended operation of sections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 1</span><br><span style="font-weight:bold">Sections</span><span style="font-weight:bold"> </span><span style="font-weight:bold">716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">340 and 716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">345 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> operate in relation to:</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 2</span><br><span style="font-weight:bold">In the same way as they operate in relation to:</span></p></td></tr></thead><tbody><tr><td style="width:5.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:161.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>46</span><span>‑</span><span>90 of that Act</span></p></td><td style="width:156.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>40</span><span>‑</span><span>455 of that Act</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software pool created under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure allocated to a software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Software, expenditure on which was in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>In</span><span>‑</span><span>house software, expenditure on the development of which is allocated to a software development pool</span></p></td></tr></tbody></table> ``` (1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: Section 703‑30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004. (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time) a wholly‑owned subsidiary of the entity that became the head company of the group (the head entity), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier‑1 company of the group at the formation time. Despite the amendment of section 719‑30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) Section 719‑160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719‑160(3) of the Income Tax Assessment Act 1997. (3) However, that effect of section 719‑160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division. (2) Paragraphs 701‑1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier‑1 company at the time the MEC group came into existence. (a) the entity and one or more other entities were members of a potential MEC group as eligible tier‑1 companies, throughout the period: (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier‑1 company, at the time the transitional group came into existence. To avoid doubt, sections 707‑325 and 707‑327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719‑305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707‑A of that Act. Subsection 719‑325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006. (1) A reference in an agreement to item 25 of the table in subsection 721‑10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: (1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: Division 725 applies to a scheme entered into on or after 1 July 2002. It also applies to a scheme entered into on or after 27 June 2002, but only if: ### Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (1) Division 727, as inserted by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 and amended by the New Business Tax System (Consolidation and Other Measures) Act 2003, applies to a scheme entered into on or after 1 July 2002. (b) a presumed indirect value shift that happens under the scheme and affects a realisation event that happens on or after 1 July 2002. (a) the economic benefits taken into account in determining that the scheme has resulted in that indirect value shift or presumed indirect value shift include economic benefits provided by: > Note: In that case, the consequences of the trigger event are worked out under Division 138 or 139 of the Income Tax Assessment Act 1997: see items 13 and 14 of Schedule 15 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002. (1) An indirect value shift does not have consequences under Division 727 of the Income Tax Assessment Act 1997 if, to the extent of at least 95% of their total market value, the greater benefits consist entirely of: (a) a right to have services that are covered by section 727‑240 of that Act provided directly by the losing entity to the gaining entity; or (d) if the losing entity’s 2002‑2003 income year ends before 30 June 2003—the start of the losing entity’s 2004‑2005 income year. (2) For the purposes of section 727‑850 (about a presumed indirect value shift affecting a realisation event) of the Income Tax Assessment Act 1997, subsection (1) of this section applies to the presumed indirect value shift: #### 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (2) Paragraph 727‑470(2)(a) of the Income Tax Assessment Act 1997 (as in force immediately before the commencement of this section) continues to have effect in relation to the indirect value shift as if the repeals and amendments made by Schedule 1, Parts 1 and 2 of Schedule 3 and Schedule 8 to the Tax Laws Amendment (Small Business) Act 2007 had not been made. ## Division 420 Registered emissions units ## Subdivision 420 ‑A—General application provision ## 420‑1 Application of Division 420 of the 420‑1 Application of Division 420 of the Income Tax Assessment Act 1997 Division 420 of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division. ## Part 3 ‑80—Roll‑overs applying to assets generally (a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and (2) Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001 (the new Act) applies to the plant on this basis: (a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant’s opening adjustable value; and (b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and (c) if you excluded an amount from your assessable income under section 42‑290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999—the cost of the plant, and its opening adjustable value, are reduced by that amount; and (d) if subparagraph (1)(b)(ii) applies to you—you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi‑owner of the plant under the former Act continue. (3) If you were using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis: (a) for the diminishing value method—replace the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate you were using; and (i) replace the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate you were using; and (ii) increase the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note 1: Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced. > Note 2: Small business entities can choose to work out the decline in value of their depreciating assets under Division 328. (a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or (3) If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40‑70(1) or 40‑75(1) of the new Act that includes the plant’s effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and (2) For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets. (3) For a case where the plant is merged into another depreciating asset, section 40‑125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it. (b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and (a) you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and (b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU’s opening adjustable value. (1) Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001. (2) For a unit of software for which you were deducting amounts under Subdivision 46‑B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis: (d) you must use the same effective life you were using under Subdivision 46‑B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001. (1) This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day. (b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and (c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and (1) This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001. > Note: Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8). (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330‑80 of the former Act for your income year ending on 30 June 2001; and (c) in applying the formula in section 40‑75 of the new Act for the income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The remaining effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these: (i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and (ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (7) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and (b) the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of expenditure incurred in carrying on eligible quarrying operations—the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (i) you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day) after 30 June 2001; or (ii) the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day) after 30 June 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which the start day occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year. there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (1) This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330‑H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and (c) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (i) any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset); (i) any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (4) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (4) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (b) the expenditure would have been transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330‑H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for your income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (1) Despite subsections 40‑35(5), 40‑38(5) and 40‑40(4), there is no additional decline in the value of the notional asset referred to in those subsections if: (a) apart from this section, subsection 40‑35(5), 40‑38(5) or 40‑40(4) would apply because the real asset referred to in that subsection is disposed of; and (a) at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373‑35 of the former Act; and (b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day. (a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and (1) Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time). (2) Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time. (a) you have deducted or can deduct an amount under Subdivision 387‑G of the former Act for an amount (the qualifying amount) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and (b) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and (1) This section applies to you if you have deducted or can deduct an amount under Subdivision 400‑A of the former Act for an amount (the qualifying amount) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400‑A of the former Act. (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and (c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400‑15(3) of the former Act; and (1) Units of plant that you had allocated to a pool under Subdivision 42‑L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act. (a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and (c) in applying the formula in section 40‑70 of the new Act for your income year in which 1 July 2001 occurs—it has a base value equal to that opening adjustable value; and (d) you replace the component in the formula in subsection 40‑70(1) of the new Act that includes an asset’s effective life with the pool percentage you were using for the pool; and (e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40‑115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and (f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset. (3) An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item). > Note 1: You work out the decline in value of an item removed under this subsection under Subdivision 40‑B of the new Act, using the cost for it worked out under section 40‑205 of the new Act. (b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset. (2) The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year) in this way: (a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and (b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section. (a) for a unit of plant (including IRUs and expenditure on software that is not pooled)—its undeducted cost at the end of 30 June 2001; or (b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence—the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or (c) for transport capital expenditure—the entity’s amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or (d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (e) for expenditure on evaluating the impact on the environment of a project—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (f) for assets that were pooled under Subdivision 42‑M or 42‑L of the former Act—the closing balance of the pool at the end of 30 June 2001. (4) The asset’s base value for applying the formula in section 40‑70 of the new Act for the diminishing value method is that opening adjustable value. (5) The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an item of plant for which you were using the prime cost method—using the rules in section 40‑10 of this Act; and (c) for a unit of software for which the entity was deducting amounts under Subdivision 46‑B of the former Act—using the rules in subsection 40‑25(2) of this Act; and (f) for an amount of expenditure on evaluating the impact on the environment of a project—using the rules in section 40‑55 of this Act. (6) The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an amount of unrecouped expenditure under Division 330 of the former Act—using the rules in section 40‑35 of this Act; and (b) for an amount of transport capital expenditure under Division 330 of the former Act—using the rules in section 40‑40 of this Act; and (7) The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act. (a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑C of the former Act; or (b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑H of the former Act; or (c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387‑B of the former Act; or (d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; or (e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365. (9) The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001. (10) You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount). (11) You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount. (1) Subsections 40‑65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened: (b) you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act. (a) paragraph 40‑65(6)(a) of the Income Tax Assessment Act 1997 included both events set out in subsection (1) of this section; and (b) subsections 40‑65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events. (1) A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936. (2) An amount you have deducted or can deduct for a water facility under Subdivision 387‑B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40‑F of the new Act. (3) A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936. (a) you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40‑115 (about splitting a depreciating asset) or 40‑125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and (b) it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40‑72 of that Act; (2) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if: (c) it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40‑72 of that Act. (3) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset) before 10 May 2006 if: (b) the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and (d) it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40‑72 of that Act. (a) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you: (b) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001. (2) If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act. (3) Otherwise, Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section. (a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or (b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or (ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life. (1) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001. > Note: If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40\. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997. (1A) Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001. (1B) Subsection (1) applies to a mining, quarrying or prospecting right (the new right) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if: (i) the other company is a member of the same wholly‑owned group as the original holder and was a member of that group just before that day; and (ii) the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer. (1D) Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if: (b) the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001. (a) you acquired, under an interest realignment arrangement, an interest (a new interest) in a mining, quarrying or prospecting right; and (b) the interest was acquired in exchange for one or more other interests (old interests) in other mining, quarrying or prospecting rights; and Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001. (a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or (b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership; the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act. (3) An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that: (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act. (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act. (6) Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243. (7) An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if: (a) you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and (8) The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section. (c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act. (2) Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001. A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act. if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011. (2) The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011. (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset for an income year is the amount worked out under section 40‑130 if: (a) the income year is the year in which you start to use the asset, or have it installed ready for use, for a taxable purpose; and (b) subsection (2) (about businesses with turnover less than $500 million) applies to you for the year and for the income year in which you started to hold the asset (if that was an earlier year); and > Note 1: An effect of paragraph (1)(a) is that this Subdivision only applies to one income year per asset. See also subsection 40‑135(1). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $500 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. Exception—assets for which the decline in value is worked out under section 40‑82 or Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (3) However, this section does not apply to a depreciating asset for an income year if you work out the decline in value of the asset for the income year under any of the following: (1) For the purposes of paragraph 40‑120(1)(c) and section 328‑182, you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you: > Note: Section 328‑182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997. (i) entering into a contract under which you hold the post‑12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑12 March 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post‑12 March 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (8) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (9) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (10) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (1) For the purposes of section 40‑120, the decline in value for the income year in which paragraph 40‑120(1)(a) is satisfied (the current year) is: > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 12 March 2020 to 30 June 2020 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2020 to 30 June 2021. (a) 50% of the asset’s cost as at the end of the current year, disregarding any amount included in the second element of the asset’s cost after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997, assuming its cost were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (3) However, the amount worked out under subsection (2) for an income year cannot be more than the amount that is the asset’s cost for the year. (a) 50% of the sum of the asset’s opening adjustable value for the current year and any amount included in the second element of its cost for that year, disregarding any amount included in that second element after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997 assuming: (ii) for the prime cost method—the component “Asset’s \*cost” in the formula in subsection 40‑75(1) of that Act (as adjusted under that section) were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (b) for the prime cost method—the sum of its opening adjustable value for the income year and any amount included in the second element of its cost for that year. (1) The decline in value of a depreciating asset is not worked out under this Subdivision for an income year if this Subdivision already applied in working out the decline in value of the asset for an income year. (2) For an income year later than the year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (3) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (4) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) You may choose that the decline in value of a particular depreciating asset for an income year, and subsequent income years, is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the first income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. If this Subdivision applies to work out the decline in value of a depreciating asset you hold for an income year, no other provision of this Act or the Income Tax Assessment Act 1997 applies to work out that decline in value. (1) For the purposes of this Subdivision, you are covered by this section for a depreciating asset if, on or before 30 June 2023: (2) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (3) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or Exception—assets for which the decline in value is worked out under Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (a) the asset is allocated to a low‑value pool, or expenditure on the asset is allocated to a software development pool (see Subdivision 40‑E of the Income Tax Assessment Act 1997); or (b) you or another taxpayer has deducted or can deduct amounts for the asset under Subdivision 40‑F of the Income Tax Assessment Act 1997 (about primary production depreciating assets). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $5 billion; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this section. (ii) if the 2019‑20 income year ends on or before 6 October 2020—the sum of your ordinary income (if any) and statutory income (if any) for the 2019‑20 income year; and (c) the sum of the amounts worked out under subsection (3) for the 2016‑17, 2017‑18 and 2018‑19 income years exceeds $100 million. (b) next, work out the cost of each of those assets (including any amounts included in the second element of the asset’s cost at a time that is in the income year); (4) For the purposes of subsection (3), disregard an asset if, at the time you first used the asset, or had it installed ready for use, for a taxable purpose: (a) it was not reasonable to conclude that you would use the asset principally in Australia for the principal purpose of carrying on a business; or (5) For the purposes of paragraph (3)(b), to work out the cost of a depreciating asset that is capital works (see section 43‑20 of the Income Tax Assessment Act 1997): (a) disregard section 40‑45 of that Act and work out the cost of the capital works using Subdivision 40‑C of that Act; and (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under subsection (3) if: (a) where section 40‑155 covers you for the current year (regardless whether section 40‑157 also covers you for the current year)—an exclusion applies to you and the asset for the current year under section 40‑165 (about exclusions for businesses with turnover of $50 million or more); or (ii) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s start time occurs in the current year—the asset’s cost as at the end of the current year, disregarding any amount included in the asset’s cost after 30 June 2023; or (b) if the asset’s start time occurred in an earlier year—the sum of its opening adjustable value for the current year and any amount included in the second element of its cost for the current year, disregarding any amount included in the asset’s cost after 30 June 2023. > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 6 October 2020 to 30 June 2021 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2021 to 30 June 2022. (a) where paragraph 40‑160(2)(a) applies—section 40‑155 would not cover you for the income year if the reference in that section to $5 billion were instead a reference to $50 million; and (i) entering into a contract under which you hold the post‑6 October 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑6 October 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of satisfying paragraph 40‑160(1)(a) for the post‑6 October 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you already satisfied paragraph 40‑160(1)(a) of this Act for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (9) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (1) For the purposes of subsections 40‑160(2) and 40‑170(1A), an exclusion applies to you and an asset for an income year if any of the exclusions in this section applies in relation to the asset. (4) This exclusion applies in relation to the asset if the asset is available for use, at any time in the income year, by any of the following: (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under this section if: (ii) you started to use the asset, or have it installed ready for use, for a taxable purpose in an earlier income year; and (b) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under section 40‑82 of the Income Tax Assessment Act 1997—the amount worked out under subsection (3); or (b) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under Subdivision 40‑BA of this Act—the amount worked out under subsection (4); or Assets affected by section 40‑82 of the Income Tax Assessment Act 1997 (about assets costing less than $150,000, medium sized businesses) (a) the amount that would be the asset’s decline in value for the year under section 40‑82 of the Income Tax Assessment Act 1997, assuming the reference in subparagraph 40‑82(3A)(b)(ii) of that Act to 31 December 2020 were instead a reference to the 2020 budget time; and (a) the amount that would be worked out under paragraph 40‑130(2)(a) or (4)(a) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(a) and (4)(a) to 30 June 2021 were instead references to the 2020 budget time; and (c) the amount that would be worked out under paragraph 40‑130(2)(b) or (4)(b) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(b) and (4)(b) to “the amount worked out under paragraph (a)” were instead references to “the amounts worked out under paragraphs 40‑170(4)(a) and (b)”. (a) the amount that would be the asset’s decline in value for the year under Division 40 of the Income Tax Assessment Act 1997, disregarding any amounts included in the eligible second element worked out under section 40‑175 of this Act for the asset for the year; and The amount worked out under this section (the eligible second element) for a depreciating asset for an income year is the sum of any amounts included in the second element of the asset’s cost at a time that is in both of the following periods: (1) For an income year later than a year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (2) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (3) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) This section applies if the decline in value for a depreciating asset for an income year is worked out under this Subdivision, and at a time (the balancing adjustment time) in a later income year: (i) it becomes not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (b) none of the requirements in paragraphs 40‑295(1)(a), (b) or (c) of the Income Tax Assessment Act 1997 are satisfied in relation to the asset. (2) For the purposes of Subdivision 40‑D of the Income Tax Assessment Act 1997 assume that, at the balancing adjustment time, you stop using the asset, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again. (3) For the purposes of section 40‑180 of the Income Tax Assessment Act 1997 assume that the reference in item 3 of the table in subsection 40‑180(2) of that Act to “because you stop using it for any purpose expecting never to use it again” were instead a reference to “because of section 40‑185 of the Income Tax (Transitional Provisions) Act 1997”. (4) If a balancing adjustment event happens to a depreciating asset you hold because of this section, this Subdivision cannot apply to work out the decline in value of the asset for a later income year. (1) You may choose that the decline in value of a particular depreciating asset for an income year is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year. (1) Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40. (a) you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset: (ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and (4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day. (5) The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if: (i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or (ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and  > sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose. (7) Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens: (a) if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b). (i) an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and (ii) the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and (3) The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount. (a) on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and (c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and (ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal; (2) There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal. (3) Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount. If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997. (a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and (b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and: (i) the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, the R&D entity is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—a clawback amount under section 355‑447 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑466 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. (b) section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions. > Note 2: The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and: (i) the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset; (ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, an R&D entity (the partner) that is a partner in the R&D partnership and is entitled to one or more new law deductions for one or more income years for the asset, is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—a clawback amount under section 355‑449 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑468 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s new law deductions mentioned in paragraph (2)(b) of this section. (4) Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event. > Note: Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions. (1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant. (b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and (3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it. (a) there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and (b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act. (2) The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor. (3) The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and <table cellspacing="0" cellpadding="0" style="width:364.2pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:353.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading" style="page-break-inside:avoid"><span>Conditions for small business taxpayers retaining accelerated rates</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Condition</span></p></td></tr></thead><tbody><tr><td style="width:21.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:321.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>The transferee must have been a small business taxpayer for the income year (the </span><span style="font-weight:bold; font-style:italic">start year</span><span>) that includes the time when the entity first used the plant, or first had it installed ready for use.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>2</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>At that time, neither of these applies:</span></p><p class="Tablea"><span>(a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;</span></p><p class="Tablea"><span>(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection</span><span> </span><span>(5).</span></p></td></tr></tbody></table> ``` (4) For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership. (5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement. (a) for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or (i) replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and (ii) increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).  (b) if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11). (c) that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and (d) that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and (e) that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity. (a) for taxable supplies (if any) the entity makes during the year in the course of carrying on a business—the value (as defined by section 9‑75 of the GST Act) of the supplies; and (b) for other supplies the entity makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies. (1) The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for: (a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (c) for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or (d) for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant. (3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115. (4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain. (5) Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee. (i) the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or (a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and (1) A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act. (2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year. For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if: Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act. (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset): and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply. (i) for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or (ii) for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and (c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act. (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and (2) Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act. The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under: (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on: (2) You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act. (3) A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under: (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and (2) Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act. A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act. The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001. If: (d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act; (a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and (a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and (b) the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and (c) paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997. Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years. (1) For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section. (b) the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (b) that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (1) There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea" style="page-break-after:avoid"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a); and</span></p><p class="Tablea" style="page-break-after:avoid"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (b) disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (f) an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division. (4) If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45‑5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest. (5) If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45‑10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest. Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Disregard the use of the following amounts in determining (for the purposes of Subdivision 50‑A of the Income Tax Assessment Act 1997 whether a fund established before 1 July 1997 operates and pursues its purposes in Australia: Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years. (2) However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date. Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if: (b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time. Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years. 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years (1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act. <table cellspacing="0" cellpadding="0" style="margin-left:56.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:258.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Application provisions for specific sections</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-size:9pt; font-weight:bold">Item</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">This section of the </span><span style="font-size:9pt; font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-size:9pt; font-weight:bold"> ...</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">Applies as described in this provision of this Act ...</span></p></td></tr></thead><tbody><tr><td style="width:24.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55(1)</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>95</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>8</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td></tr></tbody></table> ``` (a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and (b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997. > Note: Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year. (b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997; sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997). > Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock. (3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997. (a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and (b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936; > Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal. #### 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997. (1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year. (2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936. (3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year: (a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners; (b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed. > Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year. > Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year. (b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year; the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year. (2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. (3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2). #### 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997. #### 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business (1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. (2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity. > Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997. (1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. (2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value. > Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997. #### 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year. (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. > Note: Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. > Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given). (5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act). (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment. > Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%. (5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%. (6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.  > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section. (b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4). Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age. Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later. Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies. Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3. (4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997. (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%. > Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986. (5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D. > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. (a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and (b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year). (3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and (2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual: (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income. > Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F. > Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997. > Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997. #### 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 (1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012. (2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies. (3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act. (b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009. (2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if: (i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest; (iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or (i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest; (iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009. (2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time. (4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2): (a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and (b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being: (ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and (c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and (d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if: (i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or (ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and (e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and (i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and (ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and (g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest. (a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced: (i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or (ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and (b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5. (2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right. (3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right. (2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. (3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section. Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years. (1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision. > Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision). > Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936). > Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997. (a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936. (1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936. (2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997. > Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997. (3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and (d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; (f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time. > Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and (d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015. (a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or (4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if: (b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset. The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year. (a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and (1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied: (b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and (d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works). (3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936. Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936. (b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006. (2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement. > Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement. Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual: (b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her. 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act (1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee). (2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year: (3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection. #### 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997. Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936). (2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if: (a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; (a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011); (b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986. > Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section. If: (a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and (b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936; Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995. (1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997. (2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997. (3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997. (4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997. > Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one. Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year: (a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and (b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year; the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation. Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset. (b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section); > Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply. (1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if: (a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and (2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value. (4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value. (a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997. (2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less. (1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936: (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. (1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if: (2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by: (a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or (a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or (2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period. Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year: If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997. (1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002. (2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset. (3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required. (i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and (ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and (c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and (f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997). (a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or (1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:  > total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part. (a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or (2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section. (3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1). (1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences. > Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997. (c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets). (4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act. (5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act. Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement. (a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and (2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time. (a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and (ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs. (2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer. (a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and (b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest; (2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event. (3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly. (4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly. <table cellspacing="0" cellpadding="0" style="width:362.55pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:351.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Creating a CGT asset</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">CGT event number</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Applicable amount</span></p></td></tr></thead><tbody><tr><td style="width:50.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D1</span></p></td><td style="width:290.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the incidental costs the originating company incurred that relate to the CGT event</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D2</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the option</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D3</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the right</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>F1</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred on the grant, renewal or extension of the lease</span></p></td></tr></tbody></table> ``` (5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day. A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision. (a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996. (b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. (b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend. (3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities. (1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company. (2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred. (3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company. (1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of: (2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of: (3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note. (1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised. (b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and (ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act. You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and (b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996. (c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and (c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over. (3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. (a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and (c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and (d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act. (3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division. Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years. A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: (1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day. (2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice. (a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and (b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and (a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and (b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and (c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group. (5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004. (6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection. (1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss): (b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions); and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time: (i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or (e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and (f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and (ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred; (2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if: (a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these: (i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset; (ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and (3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act. (a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and (b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section. (5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of: (a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and (b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset. Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. (ii) that could have been deducted, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the deduction had not been limited by the company’s income for that income year; and (ii) that could have been applied, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the application of the loss had not been limited by the company’s capital gains for that income year. 170‑C Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred #### 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years. #### 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). #### Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997. Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997. If: (a) all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (d) that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and (e) the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place. Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years. > introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament. Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day. #### Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting #### 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B. (1) The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day. (2) No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted. #### 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting (1) Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if: (a) the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and (b) none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount. (2) No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount. (1) This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account. (2) For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. > Note 2: If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60. (3) For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)). (4) For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. (5) The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if: (a) during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and (b) the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section. (a) the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and (b) during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components. (7) For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. (8) Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it: (b) the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component. (9) Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component. (10) For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002: (b) lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination; (c) a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination); (e) the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination); (f) the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination). Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period: 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows: (a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and (i) in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and (ii) in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. > Note: A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002. #### 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002: (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:23.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:87.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A franking surplus</span></p></td><td style="width:220.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.009.png" width="175" height="58" alt="Start formula Amount of the class A franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.010.png" width="190" height="56" alt="Start formula Amount of the class B franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.011.png" width="190" height="56" alt="Start formula Amount of the class C franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` #### 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus): (a) a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Original surplus</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:85.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>class A</span></p></td><td style="width:220.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.012.png" width="169" height="38" alt="Start formula Amount of the original class A surplus times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.013.png" width="169" height="38" alt="Start formula Amount of the original class B surplus times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.014.png" width="169" height="38" alt="Start formula Amount of the original class C surplus times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (4) If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit): (a) a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company. (5) The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking deficit into 1997 Act franking debit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Original deficit</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking debit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(4)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:70.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A</span></p></td><td style="width:235.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.015.png" width="164" height="38" alt="Start formula Amount of the original class A deficit times start fraction 39 over 61 end fraction end formula "></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.016.png" width="164" height="38" alt="Start formula Amount of the original class B deficit times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.017.png" width="164" height="38" alt="Start formula Amount of the original class C deficit times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (2) A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if: (c) the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions. (3) The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if: (b) the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and (1) While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit. (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year. (3) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: > Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act. (1) The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account. (a) a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time; (3) If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if: (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity. #### 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If: the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time. (1) Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections. (2) If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year. Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year. Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year. (5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in: that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement. (6) The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (7) The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (2) The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (3) The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (i) are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and (a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and (b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section. (a) whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and (1) This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002. (a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and (3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded. (1) This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002; (2) If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (3) If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (4) If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. (5) If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows: (a) any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and (i) in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and (ii) in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. #### 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF.  #### 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act). (2) If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus): (a) a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF. (4) If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit): (a) a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF. This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period). (1) The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period: (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (1) The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period. (2) The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner. (3) The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5. (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and (d) the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner; the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received. (3) A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time: (1) A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends. (2) However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period. (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (a) the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed: (d) the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and (e) the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return. (2) The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day. (1) The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period. (2) The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made. Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period. (b) on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax); the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed: (c) the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and (d) the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return. (2) The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day. The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period: If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day. If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and If: (a) a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and (b) the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment; In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment. If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment. The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with. If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953. (1) Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period. (a) the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and (b) the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3); the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on: (c) if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or If: Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax. Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division. If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997. (a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day: (3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002. (a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002: > Note: As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date. (b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997. In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003. (1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year. (a) a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of: (i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time; (iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period; (2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if: (b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time: (ii) the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. > Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. > Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. (7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table: <table cellspacing="0" cellpadding="0" style="width:365.35pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount of the franking credit and the exempting debit</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">If:</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the credit and debit is:</span></p></td></tr></thead><tbody><tr><td style="width:22.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The period starts immediately after 7.30</span><span> </span><span>pm by legal time in the Australian Capital Territory on 13</span><span> </span><span>May 1997</span></p></td><td style="width:141.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Both these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was not in surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>All these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was in surplus at the start of the period;</span></p><p class="Tablea"><span>(c) the surplus in the account at the switch time is greater than the surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the franking surplus in the Australian company’s franking account at the switch time; and</span></p><p class="Tablea"><span>(b) the franking surplus in the Australian company’s franking account at the start of the period</span></p></td></tr></tbody></table> ``` (a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and (b) the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period. Subdivision 235‑I of the Income Tax Assessment Act 1997 applies to assets acquired by the trustee of an instalment trust in: (1) Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years. (2) However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time). (3) The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997. Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997. (2) Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in: (1) Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that: (b) is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose. (a) if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007. > Note: To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997. (b) contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option; the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option. (3) For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5). (4) If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is: (a) the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less (b) the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest. (5) If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is: (6) If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil. (1) If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one. (2) If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year. (3) If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year. (a) for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and (b) for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year: Step 1. Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. Step 2. Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3). Step 3. If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year. > Note: Example: Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75): (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred: (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times: (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate. Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008. (a) the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and (b) the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities: (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (i) the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or (ii) the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and (f) none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made: (i) Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event; (ii) a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year. (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (b) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (c) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year #### 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year (a) the requirements set out in paragraphs 275‑610(1)(a), (b) and (c) of the Income Tax Assessment Act 1997 are satisfied in respect of an amount of non‑arm’s length income of a managed investment trust in relation to an income year; and (b) the managed investment trust became a party to the scheme mentioned in paragraph 275‑610(1)(a) of that Act before the day on which the Bill that became the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 was introduced into the House of Representatives; and Division 276 of the Income Tax Assessment Act 1997 as inserted in that Act by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (the amending Act) applies as set out in subitem 1(1) of Schedule 8 to the amending Act. (b) if the trustee of the trust has made a choice for the purposes of paragraph 1(1)(b) of Schedule 8 to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016—the first income year starting on or after 1 July 2015; or (c) if the trustee of the trust has made a choice for the purposes of subparagraph 276‑10(1)(e)(i) of the Income Tax Assessment Act 1997 in respect of the 2016‑17 income year—that income year. (c) the trust is an AMIT for an income year (the discovery year) that is the starting income year or a later income year. (1) This section applies if the trust has an under or over of a character in the discovery year relating to the base year. (b) if, at a time, the trust sent its members distribution statements for an income year that is prior to the starting income year—assume that the trust sent those members AMMA statements for that income year at that time. (3) For the purposes of Division 276 of the Income Tax Assessment Act 1997, treat the under or over mentioned in subsection (1) as an under or over of the AMIT, in the discovery year relating to the base year, of the character mentioned in that subsection. (a) had the under or over mentioned in subsection (1) been discovered before the starting income year, this Act would have operated to produce a particular effect (the pre‑AMIT scheme effect) for the base year in relation to the amount or amounts reflected in the under or over; and 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT #### 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT (b) working out the amount (if any) of the entity’s capital gain under subsection 104‑70(4) of the Income Tax Assessment Act 1997. (3) For the purpose of working out the amount of the non‑assessable part mentioned in paragraph 104‑70(1)(b), treat the following provisions as being in operation at the time the payment was made: (b) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in paragraph (a). (4) Subsection (3) does not apply to the extent (if any) that the entity, in the income tax return that it lodged for the income year in which the payment was made, included the amount of the payment in its assessable income for that income year. (5) For the purposes of section 118‑20 of the Income Tax Assessment Act 1997, treat this section as being in Part 3‑1 of that Act. (2) The Commissioner cannot amend the entity’s assessment for the income year in which the payment was made in a particular way if: (b) the Commissioner could not amend the assessment in that way if the following provisions were in operation at the time the payment was made: (ii) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in subparagraph (i); and Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82‑10F). (2) The object of this section is to apply (with modifications) provisions limiting deductibility in respect of certain contributions made during the period that: (a) Subdivisions AA and AB of Division 3 of Part III of the Income Tax Assessment Act 1936, as in force just before they were repealed by the Superannuation Legislation Amendment (Simplification) Act 2007; (b) any other provision of the Income Tax Assessment Act 1936, or of any instrument made under that Act, to the extent that it relates to the operation of those Subdivisions; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of those Subdivisions. (b) the deduction limit mentioned in section 82AAC for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (c) the deduction limit mentioned in section 82AAT for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (d) Division 290 of the Income Tax Assessment Act 1997 did not apply to contributions made during the income year mentioned in paragraph (a). (2) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of a defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection and subsection (4), the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 5 September 2006; (b) the defined benefit interest mentioned in paragraph (2)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 5 September 2006, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (2)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (4) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of the defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection, the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 12 May 2009; (b) the defined benefit interest mentioned in paragraph (4)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 12 May 2009, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (4)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (1) The object of this section is to apply (with modifications) provisions relating to excess non‑concessional contributions tax in respect of certain contributions made during the period that: (b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision. (ea) in a case where paragraph 292‑95(1)(b) of that Act would have allowed the contribution mentioned in that paragraph to be made at a time within that period—that paragraph allowed the contribution to be made on or before 30 June 2007; and (f) paragraph 292‑95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and (fa) in a case where subsection 292‑100(2), (4), (7) or (8) of that Act would have allowed the contribution mentioned in that subsection to be made at a time within that period—that subsection allowed the contribution to be made on or before 30 June 2007; and (g) paragraph 292‑100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and (h) contributions made during that period that are covered under section 292‑100 of that Act reduce the person’s CGT cap amount for the 2007‑2008 financial year in accordance with subsection 292‑105(2) of that Act (and despite subsection (1) of that section); and (i) if the conditions in subsection (4) are satisfied—the person’s excess non‑concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and (b) the Commissioner gives the person a transitional release authority under subsection 292‑80A(2) in response to the application; and (c) the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292‑80B within 21 days after the date of the release authority; and (d) the superannuation provider pays the person the amount required under section 292‑80C in relation to the transitional release authority. (b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act). (6) The amount to be included in the first person’s amount of non‑concessional contributions under subparagraph (3)(b)(ii) is the sum of: (a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and (b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made. (c) under Division 295 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)), the contribution is included in the assessable income of the superannuation provider in relation to the superannuation plan to which the contribution is made; and (8) For the purposes of paragraph (7)(b), treat the person as an employee of the other entity if the person would be treated as an employee of the other entity under Division 290 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)). (1) A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007. (2) The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292‑80(3)(b)(i), the person would have excess non‑concessional contributions for the financial year mentioned in paragraph 292‑80(3)(a). (4) For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out: The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 21 days after the date of the release authority. (1) A superannuation provider that has been given a transitional release authority in accordance with section 292‑80B must pay to the person within 30 days after receiving the release authority the least of the following amounts: (a) if the person requests the provider in writing to pay a specified amount in relation to the release authority—that amount; (c) the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person in complying superannuation plans. > Note 1: Section 288‑95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection. > Note 2: Section 288‑100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority. > Note 3: For reporting obligations on the superannuation provider in these circumstances, see section 390‑65 in Schedule 1 to the Taxation Administration Act 1953. (2) The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person in complying superannuation plans. (3) Section 307‑125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section. (a) your non‑concessional contributions cap for the 2015‑2016 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsection 292‑85(7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 applies after the commencement of this section as if: (d) subsection 292‑85(6) of that Act as so amended had been applied (taking into account paragraph (c) of this subsection) for the purposes of working out your non‑concessional contributions cap for the 2016‑2017 financial year. (2) For the purposes of working out your non‑concessional contributions caps for the 2017‑2018 financial year and the 2018‑2019 financial year, if: (a) your non‑concessional contributions cap for the 2016‑2017 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsections 292‑85(6) and (7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 apply after the commencement of this section as if the amount worked out under subsection 292‑85(5) of that Act as so amended were $380,000. (3) To avoid doubt, this section does not affect your non‑concessional contributions cap for any financial year that ended before 1 July 2017. The tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your non‑concessional contributions (see section 292‑90 of the Income Tax Assessment Act 1997) for the financial year. (2) Subject to section 294‑55, the amendments of Division 294 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Treasury Laws Amendment (2017 Measures No. 2) Act 2017 apply on and after 1 July 2017. Despite sections 294‑30 and 294‑140 of the Income Tax Assessment Act 1997 (which are about when you have excess transfer balance), you do not have excess transfer balance in your transfer balance account on any day in the period of 6 months beginning on 1 July 2017 if: (a) the only transfer balance credits in the account in that period arose under item 1 of the table in subsection 294‑25(1) of that Act (which is about superannuation income streams you have just before 1 July 2017); and (b) the sum of those transfer balance credits exceeds your transfer balance cap, but is less than or equal to $1,700,000; and (c) at the end of the period, the sum of all the transfer balance debits arising in your transfer balance account equals or exceeds the amount of the excess from paragraph (b). (1) Despite subsection 294‑10(2), a transfer balance credit arises under item 4 of the table in subsection 294‑25(1) of the Income Tax Assessment Act 1997 only in relation to a borrowing that arises under a contract entered into on or after 1 July 2017. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2017 is treated as if it arose under a contract entered into before 1 July 2017 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) on 1 July 2017, a transfer balance debit arose in your transfer balance account under item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997; and (b) the sum of all the transfer balance credits that arise in your transfer balance account under item 1 of the table in subsection 294‑25(1) of that Act exceeds the amount that would, apart from this section, be the amount of that debit. (2) Despite column 2 of item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997, the amount of the transfer balance debit is instead equal to the sum worked out under paragraph (1)(b) of this section. 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain > The object of this Subdivision is to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the following legislative changes: (a) the introduction of a transfer balance cap (as a result of Schedule 1 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016); (b) the exclusion of transition to retirement income streams (and similar income streams) from being superannuation income streams in the retirement phase (as a result of Schedule 8 to that Act). (a) starting on the start of the day on which the Bill that became the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 was introduced into the House of Representatives; and (a) at the start of the pre‑commencement period, a CGT asset of a fund is a segregated current pension asset of the fund; and (i) at a time (the cessation time) in the pre‑commencement period, the asset ceases to be a segregated current pension asset of the fund; or (ii) at the start of 1 July 2017 (also the cessation time), the asset ceases to be a segregated current pension asset of the fund because it supports a superannuation income stream covered by subsection 307‑80(3) of the Income Tax Assessment Act 1997; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (b) the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year is greater than nil; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and #### 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑115(3)(a), the fund makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the fund’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Subsection 295‑390(1) of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). > 2016‑17 non‑exempt proportion means 1 minus the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year. #### 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset (i) the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997 in respect of the trust for the 2016‑17 income year; (ii) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year; and (d) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and #### 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑125(3)(a), the trust makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the trust’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Section 295‑400 of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). (a) unless paragraph (b) applies—1 minus the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997; or (b) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage worked out by subtracting the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year from 100%. This Subdivision applies to an entity that is the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust. For the purposes of this Subdivision, an asset is a 30 June 1988 asset of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust if the entity owned it at the end of 30 June 1988. > Note: Section 295‑90 of the Income Tax Assessment Act 1997 treats these assets as having been acquired on 30 June 1988. (1) The first element of the cost base of each 30 June 1988 asset of the entity’s is the greater of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). (2) The first element of the reduced cost base of each 30 June 1988 asset of the entity’s is the lesser of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). the market value of the asset as at the end of 30 June 1988 is the average of the highest and lowest trade prices for identical assets recorded on 30 June 1988 in whichever of the following markets is applicable: (d) if, on that date, there was a State capital city market (other than the Sydney market) that recorded a higher volume of trading than the Sydney market in identical assets—that State capital city market; (2) For the purposes of this section, an asset is taken to have been listed on an Australian stock exchange on 30 June 1988 if, and only if, on that day the asset had the status of having been granted official quotation by a securities exchange within the meaning of the former Securities Industry Act 1980 or the law of a State or Territory corresponding to that former Act. (b) at any time during the period commencing at the time when the shares were acquired and ending at the end of 30 June 1988, the company paid an amount that was not a dividend to the entity in respect of the shares; (b) at any time during the period commencing at the time when the interest or unit was acquired and ending at the end of 30 June 1988, the trustee of the trust paid an amount to the entity in respect of the interest or unit, being: (i) in a case where the entity was exempt from tax for the year of income in which the payment was made—an amount that, if the entity had not been exempt from tax, would not have been the entity’s assessable income; or the cost base to the entity of the interest or unit as at 30 June 1988 is reduced by so much of the amount as is not attributable to a deduction allowed under former Division 10C or 10D of the Income Tax Assessment Act 1936. (1) Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (2) and (3) of this section apply if an entity exercises rights or options as mentioned in that section to acquire: (b) the greater of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (b) the lesser of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (4) The payment referred to in subsection (2) or (3) can include giving property. To the extent that the payment does, use the market value of the property in working out the amount of the payment. (1) A notice given under subsection 82AAT(1A) or (1CB) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑170 of the Income Tax Assessment Act 1997. (2) A notice given under subsection 82AAT(1C) or (1CD) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑180 of the Income Tax Assessment Act 1997. (1) A proportion of the ordinary income and statutory income of a continuously complying fixed interest ADF of an income year that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).  > Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the income year. > Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the income year. (4) A choice for the purposes of the definition of reckoning time in subsection (5) must be made on or before the date of lodgment of the income tax return of the ADF for the income year to which the choice relates, or before a later day allowed by the Commissioner. > continuously complying fixed interest ADF, in relation to an income year (the current year), means a fund that is a fixed interest complying ADF in relation to each of the following years: > current 25 May balance, in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time: (b) subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 September 1989 is to be added to the balance; (b) a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that day, made a deposit with the ADF that consisted wholly or partly of the roll‑over (as defined in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 as in force on that day) of an eligible termination payment as so defined, being an eligible termination payment that included a concessional component (as so defined). > fixed interest complying ADF, in relation to a year of income, means a complying ADF where both of the following conditions are satisfied: (a) not less than 90% of the amount that, apart from this section, would be the assessable income of the ADF of the income year (other than non‑arm’s length income or amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997) consists of any one or more of the following: (ii) any profit arising on the disposal, redemption, cancellation or maturity of a CGT asset referred to in paragraph 295‑85(3)(b) of the Income Tax Assessment Act 1997; (iii) an amount included in assessable income under Division 16E of Part III of the Income Tax Assessment Act 1936 (or would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply); (ii) virtual PST life insurance policies (as defined in the Income Tax Assessment Act 1997) issued by a life insurance company. > original 25 May balance, in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988. > reckoning time, in relation to an ADF in relation to an income year, means the beginning of the income year, or such other time during the income year as the ADF chooses in accordance with subsection (4). (6) This section does not apply to an ADF in relation to an income year unless the whole of the benefit that would accrue to the ADF from the application of this section in relation to the income year has been, or can reasonably expected to be, passed on to eligible depositors. An election made by the trustee of a complying superannuation fund under subsection 279(4) of the Income Tax Assessment Act 1936 that had effect for the income year of the fund in which 30 June 2007 occurs continues to have effect as if it had been made under section 295‑465 of the Income Tax Assessment Act 1997. Subdivisions 295‑I (no‑TFN contributions) and 295‑J (Tax offset for no‑TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006‑2007 income year ends on a day (the end day) after 1 July 2007 as if: (b) the entity’s no‑TFN contributions income for the entity’s 2007‑2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007‑2008 income year if the contributions concerned had been made in the entity’s 2007‑2008 income year. (2) Division 301 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section because you are a member of the fund in the same way as it would apply if the payments were superannuation member benefits paid to you from a complying superannuation fund. For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. Subdivision 301‑F of the Income Tax Assessment Act 1997 applies in relation to income years starting on or after 1 July 2007. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to the following in respect of an income year that starts on or before 1 July 2021: (b) the amendments of the Income Tax Assessment (1997 Act) Regulations 2021 made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023. (a) a superannuation benefit (the trigger benefit) was paid to a person in the 2020‑21 income year or an earlier income year; and (c) the trigger benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; and (2) The Commissioner cannot amend an assessment on the basis that a superannuation benefit paid to the person is a superannuation income stream benefit because of the amendments made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 if: (iii) the superannuation benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (a) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (b) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. (1) The Minister may, by legislative instrument, make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions) that: (a) relate to the amendments or repeals made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023; and (2) Without limiting subsection (1), rules made under this section before the end of the period of 12 months starting on the day that Schedule commences may provide that provisions of that Schedule, or any other Act or instrument, have effect with any modifications prescribed by the rules. Those provisions then have effect as if they were so modified. (2) Division 302 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section after another person’s death, because the other person was a member of that fund, in the same way as it would apply if the payments were superannuation death benefits paid to you from a complying superannuation fund. For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if: (b) just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. (2) For the purposes of Subdivision 82‑B of Division 82, Division 302 and section 303‑5 of the Income Tax Assessment Act 1997, the definition of death benefits dependant in section 302‑195 of that Act applies as if paragraphs (a) and (b) of the definition were replaced with the following paragraphs: (a) a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008 or a person who was formerly such a spouse; or (b) a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008, who is aged less than 18. (ii) a superannuation guarantee payment, a small superannuation account payment, an unclaimed money payment, a superannuation co‑contribution benefit payment or a superannuation annuity payment. (2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you at a time in the period: (i) a condition of release specified in item 107A or 207AA of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; or (ii) a condition of release specified in item 109AA of the table in Schedule 2 to the Retirement Savings Accounts Regulations 1997. (1) This section applies to a superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with section 292‑80B. (2) The superannuation benefit is not assessable income and is not exempt income to the extent that it does not exceed the amount mentioned in subsection (3). (3) The amount is the amount of excess non‑concessional contributions stated in the release authority in accordance with paragraph 292‑80A(3)(a), reduced (but not below zero) by the amount of any superannuation benefit that was not assessable income and not exempt income under a previous operation of subsection (2) in relation to the release authority. (4) The superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3). (a) you have an interest in a FIF (within the meaning of Part XI of the Income Tax Assessment Act 1936, as in force just before the commencement of item 37 of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010) (the paying fund); and (b) Subdivision 305‑B of the Income Tax Assessment Act 1997 applies in relation to the paying fund (see section 305‑55 of that Act); and (c) the paying fund transfers an amount to a complying superannuation fund in respect of you during the deduction year; and (d) you choose under section 305‑80 of the Income Tax Assessment Act 1997 that the amount, or part of the amount, is to be treated as assessable income of the complying superannuation fund; and (e) immediately before the transfer happens, there is a post‑FIF abolition surplus (within the meaning of the Income Tax Assessment Act 1936) for the paying fund in relation to you; and For the purposes of the definition of specified roll‑over amount in the Income Tax Assessment Act 1997, treat the taxable component of a directed termination payment (within the meaning of section 82‑10F) as the element untaxed in the fund of a superannuation benefit that is a roll‑over superannuation benefit. (1) This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007. > Note: This section also applies to an income stream replacing an earlier one because of an involuntary roll‑over (see section 307‑127). (2) Despite subsection 307‑125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows: (a) first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007); (b) next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits. The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit. (3) Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened: (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day; (ba) the holder of the superannuation interest is aged 60 or above on 1 July 2007, if none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day. (a) treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and (b) work out the tax free component of the superannuation interest for the purposes of section 307‑125 of the Income Tax Assessment Act 1997 under subsections (6) and (6A). (i) an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and (ii) the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time; (b) next, work out the unused undeducted purchase price (within the meaning of paragraph (a) of the definition of that term in subsection 27A(1) of the Income Tax Assessment Act 1936 just before the commencement of this section, and disregarding paragraphs (b) and (c) of that definition) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007; (c) next, work out the pre‑July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this section) of the eligible termination payment. (a) at least one superannuation income stream benefit was paid from the superannuation income stream before 1 July 1994; or (b) section 27AAAA of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007) applied to the superannuation income stream just before 1 July 2007; (7) For the purposes of paragraph (6)(c), disregard the value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment. (8) If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as: (b) if 1 or more other events mentioned in subsection (3) happened before the commutation—the time just before the earliest of those events happens. (a) references in that section to the later income stream (in relation to a time, or event happening, before the payment of that involuntary roll‑over superannuation benefit) include references to the earlier income stream; and (b) references in that section to the superannuation interest supporting the later income stream (in relation to a time, or event happening, before the payment of that benefit) include references to the earlier interest. (1) This section applies for the purposes of working out the amount of your total superannuation balance just before 1 July 2017. (2) The transfer balance mentioned in paragraph 307‑230(1)(b) of the Income Tax Assessment Act 1997 just before 1 July 2017 is taken to be equal to: (a) the sum of the transfer balance credits (if any) in your transfer balance account just after the start of 1 July 2017; less (b) the sum of the transfer balance debits (if any) arising in your transfer balance account on 1 July 2017 under item 4 of the table in subsection 294‑80(1) of that Act (about payment splits). (1) Section 307‑231 of the Income Tax Assessment Act 1997 applies in relation to borrowings that arise under contracts entered into on or after 1 July 2018. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2018 is treated as if it arose under a contract entered into before 1 July 2018 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) treat a deduction made under former section 279 of the Income Tax Assessment Act 1936 as having been made under section 295‑465 of the Income Tax Assessment Act 1997 instead; and (b) treat a deduction made under former section 279B of the Income Tax Assessment Act 1936 as having been made under section 295‑470 of the Income Tax Assessment Act 1997 instead. If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007‑2008 income year is, despite subsection 307‑345(1), the total of: (b) the amount by which $140,000 exceeds the upper limit for the 2006‑2007 income year (worked out under section 159SG of that Act). Division 316 of the Income Tax Assessment Act 1997 applies in relation to demutualisations occurring on or after 1 July 2008. If: (a) any assets held by the benefit funds of a life insurance company that is a friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a complying superannuation fund; and (b) the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer; the transfer is disregarded for any purposes of the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936. (1) In working out the amount that a life insurance company can deduct, in respect of life insurance policies that are disability policies (other than continuous disability policies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income. (2) In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection (1) applies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company’s liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320‑85(4) of that Act. If: (2) If the life insurance company wishes to include a part of an approved asset in its virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑87(2) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society establishes a virtual PST in the 2000‑01 income year, the calculation of the transfer values of the company’s virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year. (1) Subsection (3) applies for the purposes of subparagraph (b)(i) of the definition of virtual PST life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 259 of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007. (2) Subsection (3) also applies for the purposes of subparagraph (b)(i) of the definition of complying superannuation/FHSA life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 47 of Schedule 7 to the First Home Saver Accounts (Consequential Amendments) Act 2008. (3) Treat an annuity as having been purchased out of a superannuation lump sum or an employment termination payment, if the annuity was purchased: (b) out of an eligible termination payment (within the meaning of the Income Tax Assessment Act 1997, as in force just before the commencement mentioned in subsection (1) of this section). (2) If the life insurance company wishes to include a part of an approved asset in its segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (a) a life insurance company had a liability before 1 July 2000 under a life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and (c) there is a transfer of the company’s assets to the segregated exempt assets to meet that liability or that part of the liability; (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑105(1) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320‑225 of the Income Tax Assessment Act 1997 in the 2000‑01 income year, the calculation of the transfer values of the company’s segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year. Section 322‑25 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Part VC of the Insurance Act 1973 after 17 October 2008. 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you > new Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force after the commencement of this section. > old Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. > STS taxpayer means an STS taxpayer within the meaning of Division 328 of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. #### 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years (1) This section applies for the purpose of working out whether you are a small business entity (other than because of subsection 328‑110(4) of the Income Tax Assessment Act 1997) for the 2007‑08 or 2008‑09 income year. (2) You work out your aggregated turnover for the 2005‑06 or 2006‑07 income year as if the amendments made by Schedule 1 to the Tax Laws Amendment (Small Business) Act 2007 had been in force in relation to that year. (a) your aggregated turnover for the 2005‑06 income year (worked out in accordance with subsection (2)) is $2 million or more; but (b) your STS group turnover for that year (worked out under Subdivision 328‑F of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section) is less than $2 million. (2) The following provisions apply as if you are a small business entity for the income year in which you are winding up the business: #### 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you (1) For the purpose of working out whether you are a small business entity for the 2007‑08, 2008‑09, 2009‑10 or 2010‑11 income year (each a relevant income year) for the purposes of a provision to which subsection (3) applies: (2) An entity (the first entity) controls a discretionary trust for a relevant income year if, for any of the 4 income years (a previous income year) before that year: (a) if the previous income year is before the 2007‑08 income year—the trustee of the trust made a distribution of $100,000 or more to the first entity, any of its affiliates, or the first entity and any of its affiliates; or (i) the trustee of the trust paid to, or applied for the benefit of, the first entity, any of the first entity’s affiliates, or the first entity and any of its affiliates, any of the income or capital of the trust; and (ii) the percentage (the control percentage) of the income or capital paid or applied is at least 40% of the total amount of income or capital paid or applied by the trustee for that year. (1) This section sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (2) This section also sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (3) Any ordinary income that, apart from paragraph 328‑105(1)(a) of the Income Tax Assessment Act 1997 (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have derived before the changeover year (while you were using the STS accounting method) and you have not included in your assessable income because you have not received it is included in your assessable income for the changeover year. (4) Any general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, that, apart from paragraph 328‑105(1)(b) of that Act (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have incurred before the changeover year (while you were using the STS accounting method) and that you have not deducted because you have not paid them can be deducted for the changeover year. (b) for any later income year for which you are a small business entity but only if you used the STS accounting method for the income year before that later year. > Note: Example: You are a small business entity for the 2007‑08 and 2008‑09 income years and you continue to use the STS accounting method for those years. You are not a small business entity for the 2009‑10 income year so you cannot continue to use the STS accounting method for that year. Because you cannot use the STS accounting method for the 2009‑10 income year, you will not be able to use it again for a later income year even if you are a small business entity for that later year. In sections 328‑115 and 328‑120, STS accounting method means the accounting method that was required by the Income Tax Assessment Act 1997 to be used by STS taxpayers for the 2004‑05 income year. (b) you made a choice under subsection 328‑175(3) of old Subdivision 328‑D in relation to a depreciating asset you use to carry on a primary production business and for which you could deduct amounts under Subdivision 40‑F or 40‑G of the Income Tax Assessment Act 1997. (2) In determining whether you can choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997 in an increased access year, disregard subsection 328‑175(10) of that Act. (3) In applying paragraph 328‑175(10)(b) of that Act for the purpose of determining whether you can choose to use that Subdivision in any income year after the increased access years, disregard: (4) Paragraph 328‑180(1)(b) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that paragraph to $1,000: (i) first used the asset, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (i) first used the asset, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (i) first used the asset, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, on or after 1 July 2023 and on or before 30 June 2026. (a) a reference in that paragraph to the end of the income year in which you start to use the asset, or have it installed ready for use, for a taxable purpose were a reference to the earlier of: if: (i) first used the asset, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021. (5) Paragraph 328‑180(2)(a) or (3)(a) of the Income Tax Assessment Act 1997 applies to an amount included in the second element of the cost of an asset as if a reference in that paragraph to $1,000: (5A) For the purposes of determining whether, under subsection 328‑180(2) of the Income Tax Assessment Act 1997, you can deduct, for an income year (the current year), the taxable purpose proportion of an amount included in the second element of the cost of an asset, disregard paragraph (b) of that subsection if: (2) For the purposes of determining whether subsection 328‑180(1) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (b) of that subsection (which sets a limit of $1,000 on the cost of the asset) if, in the period beginning at the 2020 budget time and ending on 30 June 2023, you: (3) For the purposes of determining whether subsection 328‑180(2) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (a) of that subsection (which sets a limit of $1,000 on the amount) if the amount is included in the second element of the cost of the asset at any time in the period beginning at the 2020 budget time and ending on 30 June 2023. (4) In applying paragraph 328‑180(3)(a) of the Income Tax Assessment Act 1997 to an asset, disregard an amount included in the second element of the cost of the asset if the amount is deducted under subsection 328‑180(2) of that Act, as modified by subsection (3) of this section. (5) Section 328‑210 of the Income Tax Assessment Act 1997 applies as if the words “less than $1,000 but” in subsection (1) were disregarded, in relation to a deduction for an income year that ends: Subsection 328‑190(2) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that subsection to 15% were a reference to 57.5% if you are covered by section 40‑125 for the asset (which is about backing business investment). (1) A depreciating asset of yours that had been allocated to your general STS pool is treated as being allocated to your general small business pool. (2) A depreciating asset of yours that had been allocated to your long life STS pool is treated as being allocated to your long life small business pool. (3) If you made a choice, under subsection 328‑185(5) of old Subdivision 328‑D, not to have a depreciating asset allocated to your long life STS pool, the choice has effect for the purposes of subsection 328‑185(5) of new Subdivision 328‑D. (1) This section applies if a depreciating asset of yours is treated as being allocated to your general small business pool or long life small business pool under section 328‑185. (2) The opening pool balance of your general small business pool or long life small business pool for the 2007‑08 income year is taken to be the closing pool balance of your general STS pool or long life STS pool, as the case requires, for the 2006‑07 income year, reduced or increased by any adjustment required under section 328‑225 of new Subdivision 328‑D (about change in the business use of an asset). (a) you were not an STS taxpayer for the 2006‑07 income year (because you stopped being an STS taxpayer before that time); but (b) you are a small business entity for the 2007‑08 income year or a later income year and you choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets for that income year; the opening pool balance of your general small business pool or long life small business pool includes the sum of the taxable purpose proportions of the adjustable values of depreciating assets allocated to the pool under subsection 328‑185(3) of new Subdivision 328‑D for that year. (1) This section applies for the purposes of applying Subdivision 328‑D of the Income Tax Assessment Act 1997 for the 2012‑13 income year and later income years. (2) A depreciating asset that had been allocated to your long life small business pool is treated as being allocated to your general small business pool. (a) the closing pool balance of your general small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under section 328‑225 of that Act; and (b) the closing pool balance of your long life small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under that section. (1) This section applies if you chose to stop being an STS taxpayer for the 2005‑06 income year or the 2006‑07 income year. (2) You cannot choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets until at least 5 years after the income year for which you chose to stop being an STS taxpayer. > Note: Subdivision 328‑D of the Income Tax Assessment Act 1997 continues to apply to depreciating assets that have been allocated to your small business pools even if you are not a small business entity, or do not choose to use that Subdivision, for an income year: see section 328‑220 of that Subdivision. (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct 20% of particular expenditure for your 2023‑24 income year if: (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (d) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑450 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (6) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (ii) if the provider is a registered body of a kind listed in paragraph (2)(b), (c) or (d)—the training is within the provider’s scope of registration for that kind of registered body; and (d) each enrolment, or arrangement, for the provision of the training is made or entered into at or after 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022; and > Note: Paragraphs (b) and (c) mean this section will not apply to expenditure for on‑the‑job training or training provided by you in house. (a) a registered higher education provider (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); (b) a NVR registered training organisation (within the meaning of the National Vocational Education and Training Regulator Act 2011); (c) a registered education and training organisation (within the meaning of the Education and Training Reform Act 2006 (Vic.)); (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct for your 2023‑24 income year an amount that is equal to the sum of: (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (3) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑460 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (4) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (b) you incur the expenditure in the period starting at 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022 and ending at the end of: (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (4) For the purposes of paragraphs (1)(c) and (2)(c), in working out whether you can deduct an amount of expenditure on a depreciating asset, assume that: (b) throughout that effective life, you will use the asset for a taxable purpose to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose. (a) 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑470(1) or (3) applies in relation to the income year; and > Note: The deduction relates to the period of 1 July 2023 to 30 June 2024. An entity may have deducted an amount under paragraph (a) for a previous income year if the entity has a substituted accounting period. (2) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑470 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (3) Sections 8‑10, 40‑215 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (c) you start to use the asset, or have it installed ready for use, for any purpose after 30 June 2023 but before 1 July 2024; and (d) you start to use the asset, or have it installed ready for use, for a taxable purpose at a time (the start time) that is: (e) you are a small business entity, or an entity covered by subsection (4), for the income year that includes the start time; and (h) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) a new reasonably comparable depreciating asset that uses a fossil fuel (other than a use of which that is merely incidental) is available in the market at the start time; (ii) if the asset is being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than the other asset; (iii) if the asset is not being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than a new reasonably comparable depreciating asset that is available in the market at the start time; or (i) a depreciating asset (other than an asset excluded under subsection (6)) that uses electricity, or energy that is generated from a renewable source, to be more energy efficient; (iv) the use of electricity, or energy that is generated from a renewable source, by another depreciating asset to be monitored. (a) the amount is included in the second element of a depreciating asset’s cost under paragraph 40‑190(2)(a) of the Income Tax Assessment Act 1997; and (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (d) you are a small business entity, or an entity covered by subsection (4), for the income year in which the expenditure is incurred; and (i) if the asset could use a fossil fuel (other than a use of which that is merely incidental)—the asset to only use electricity, or energy that is generated from a renewable source; (ii) if the asset uses electricity, or energy that is generated from a renewable source—the asset to be more energy efficient; (g) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) For the purposes of paragraph (1)(b) or (3)(b), in working out whether you can deduct an amount of expenditure assume that: (i) for the purposes of paragraph (1)(b)—to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose; or (ii) for the purposes of paragraph (3)(b)—to the same extent as you use it for a taxable purpose in the income year in which the expenditure is incurred. (b) expenditure (other than expenditure referred to in subparagraph (3)(e)(i)) on an asset that can use a fossil fuel (other than a use of which that is merely incidental); (c) an asset that solely or predominantly generates electricity from a renewable source (for example, photovoltaic cells) or expenditure on such an asset; (d) an asset, or expenditure, being capital works for which you can deduct an amount under Division 43 of the Income Tax Assessment Act 1997; > Note: Subsections (1) and (3) also do not apply to an item of trading stock because such an asset is not a depreciating asset: see section 40‑30 of the Income Tax Assessment Act 1997. A reference in each of the following provisions of the Income Tax Assessment Act 1997 to a registration under section 27A of the Industry Research and Development Act 1986 includes a reference to a registration under former section 39J of that Act: (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) the R&D entity cannot deduct an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from: (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D entity could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:22pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the R&D entity is taken to be able to deduct under subsection 355‑315(2) of the new Act that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the R&D entity’s assessable income for the event year under subsection 355‑315(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 for the asset, the R&D entity is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑446 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the R&D entity is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑465 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: Section 355‑315 of the new Act would otherwise apply for the event in a case where the R&D entity had new law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by an R&D partnership; and (i) the partner can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the partner chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D partnership could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the partner is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:21.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D entity</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D partnership</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the partner is taken to be able to deduct under subsection 355‑525(2) of the new Act the partner’s proportion of that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the partner’s assessable income for the event year under subsection 355‑525(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partner’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if one or more partners (including the partner) in the R&D partnership is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset, the partner is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑448 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the partner is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑467 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s deductions under section 355‑520 of the new Act mentioned in subsection (4A) of this section. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the partner for the event, do so apply to the partner for the event. > Note 1: Section 355‑525 of the new Act would otherwise apply for the event in a case where the partner had new law deductions. Item 7 of the table in subsection 57‑110(2) in Schedule 2D to the Income Tax Assessment Act 1936 applies as if the deduction rules set out in the final column of that item also included former sections 73BA and 73BH of the Income Tax Assessment Act 1936. For the purposes of step 1 of the method statement in subsection 355‑415(2) of the Income Tax Assessment Act 1997, also disregard amounts that have already been taken into account under former subsection 73B(14AA) of the Income Tax Assessment Act 1936 for the R&D entity, the grouped entity and the R&D activities for an earlier income year. (1) This section applies if, apart from former paragraph 73B(10)(a) of the Income Tax Assessment Act 1936, an eligible company could deduct advance R and D expenditure in one or more income years commencing on or after 1 July 2011. > Note: That deduction would be under former section 73B of that Act as that former section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (a) apart from Subdivision H (prepaid expenditure) of Division 3 of Part III of the Income Tax Assessment Act 1936, an eligible company can deduct an amount under former section 73B, 73BA, 73BH, 73QA, 73QB or 73Y of that Act for an income year commencing before 1 July 2011; and (c) apart from former paragraph 73B(10)(a) of that Act, the eligible company could deduct an amount, as a result of that application of that Subdivision, for an income year commencing on or after 1 July 2011. > Note: That deduction would be under that Act as it applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (3) Former paragraph 73B(10)(a) of that Act is taken to apply to those income years commencing on or after 1 July 2011 as if the reference in that former paragraph to section 39J of the Industry Research and Development Act 1986 were a reference to section 27A of that Act. (4) An expression used in this section that is also used in former section 73B of the Income Tax Assessment Act 1936 has the same meaning in this section as it has in that former section. This Subdivision applies to core technology (within the meaning of former section 73B of the Income Tax Assessment Act 1936) if: (a) you incurred core technology expenditure (within the meaning of that former section) in an income year commencing before 1 July 2011 in relation to the core technology under one or more contracts entered into at or after the time referred to in former subsection 73B(12) of that Act; and (b) that expenditure (the undeducted expenditure) cannot be deducted for the last income year commencing before 1 July 2011. (1) This section applies for the purposes of Division 40 of the Income Tax Assessment Act 1997, other than sections 40‑292 and 40‑293 of that Act, if the core technology (the asset) is a depreciating asset. (2) Disregard this section, including its effect on the amount you can deduct under section 40‑25 of that Act for the asset, for the purposes of working out: (3) The asset’s opening adjustable value for the first income year that commences on or after 1 July 2011 (the first new income year) is equal to the amount of the undeducted expenditure. (4) Subsection 40‑75(2) of the Income Tax Assessment Act 1997 applies to the asset as if the first new income year were a change year (within the meaning of that subsection). If the core technology is not a depreciating asset, you can deduct the undeducted expenditure in equal proportions over a period of 5 income years starting in the first income year commencing on or after 1 July 2011. To work out the film component (if any) of your tax loss for the 1997‑98 income year or a later income year, apply former section 375‑805 of the Income Tax Assessment Act 1997. If you incurred a film loss for the purposes of former section 79F (Film losses of 1989‑90 to 1996‑97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989‑90 to 1996‑97 income years, that film loss is the film component of your tax loss for that income year. (1) To work out your film loss (if any) for the purposes of the Income Tax Assessment Act 1997 for the 1989‑90 or a later income year, apply former section 375‑810 of that Act. (2) You can deduct in the 1997‑98 or a later income year your film loss for any of the 1989‑90 to 1996‑97 income years only to the extent that it has not already been deducted. (1) Division 392 of the Income Tax Assessment Act 1997 applies to assessments for the 1998‑99 income year and later income years. (a) it had applied to your assessment for each income year before the 1998‑99 income year for which Division 16 of Part III of the Income Tax Assessment Act 1936 applied in relation to your income; and (b) you had carried on a primary production business during each income year before the 1998‑99 income year when you carried on a business of primary production; and (c) for each income year before the 1998‑99 income year you had a basic taxable income equal to your taxable income for the income year for the purposes of Division 16 of Part III of the Income Tax Assessment Act 1936. > Note: Section 149A of the Income Tax Assessment Act 1936 identifies what your taxable income for an income year is for the purposes of Division 16 of Part III of that Act. Division 392 of the Income Tax Assessment Act 1997 does not apply to your assessment for the 1998‑99 income year or a later income year if you made an election under section 158A (Election that Division not apply) of the Income Tax Assessment Act 1936 relating to an income year before the 1998‑99 income year. 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 A reference in Division 393 of the Income Tax Assessment Act 1997 to a deduction under section 393‑5 of that Act for making a farm management deposit is taken to include a reference to a deduction under section 393‑10 in Schedule 2G to the Income Tax Assessment Act 1936, as in force just before the commencement of this section, if the deposit was made before the 2010‑11 income year. #### 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 (b) the deposit was made with an FMD provider as a result of a request to which section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, applied; the unrecouped FMD deduction in respect of the deposit at that time is equal to the amount of the unrecouped deduction (within the meaning of the former subsection 159GA(3) of the Income Tax Assessment Act 1936) in respect of the deposit immediately before it ceased to be a deposit under the Loan (Income Equalization Deposits) Act 1976. > Note: This means that the unrecouped deduction relating to the deposit under the Loan (Income Equalization Deposits) Act 1976 continues to apply (by becoming an unrecouped FMD deduction) when the deposit is transferred to an FMD provider as a farm management deposit. The Loan (Income Equalization Deposits) Act 1976 was repealed on 22 February 2005. If a beneficiary of a trust was covered by paragraph (c) of the definition of primary producer in section 393‑25 in Schedule 2G to the Income Tax Assessment Act 1936 in the 2009‑10 income year, treat subsection 393‑25(3) of the Income Tax Assessment Act 1997 as having applied to the beneficiary for the purpose of determining the maximum number of choices that the trustee may make under subsection 393‑27(2) of that Act for the 2010‑11 income year. (a) a farm management deposit of an owner was unclaimed moneys for the purposes of section 69 of the Banking Act 1959; and (2) For the purpose of subsection 393‑10(1) of the Income Tax Assessment Act, treat the repaid unclaimed moneys as a repayment of the deposit of the owner. (3) To avoid doubt, the payment of unclaimed moneys to the Commonwealth under section 69 of the Banking Act 1959 is not a repayment of the deposit of the owner for the purposes of Division 393 of the Income Tax Assessment Act 1997. 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 #### 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 If a farm management deposit was made with an FMD provider as a result of a request under section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, then: (a) subsections 393‑40(1) to (4) of the Income Tax Assessment Act 1997 apply as if the day the deposit was made was the day on which the deposit was originally made under the Loan (Income Equalization Deposits) Act 1976; and (1) A copyright collecting society to which section 51‑43 of the Income Tax Assessment Act 1997 applies, may elect that, from 1 July 2004, the section apply to all ordinary income, and statutory income, collected or derived by the society on or after 1 July 2004. Division 420 of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division. Subdivision 615‑C of the Income Tax Assessment Act 1997 applies to you with the modifications set out in this Subdivision if you chose to obtain a roll‑over involving \*shares or units that: (b) were your trading stock, or revenue assets, at the time immediately before that disposal, redemption or cancellation. (1) Disregard subparagraph 615‑45(a)(ii), and paragraph 615‑45(b), of the Income Tax Assessment Act 1997 if the roll‑over relates to \*shares that were disposed of, redeemed or cancelled. (2) For each of the \*shares in the interposed company that you acquired in return for those of your shares or units in the original entity that were your \*trading stock at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  (2) For the purpose of calculating any profit or loss on a future disposal, cessation of ownership, or other realisation of a \*share in the interposed company that you acquired in return for those of your shares or units in the original entity that were \*revenue assets at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  Subdivision 620‑A of the Income Tax Assessment Act 1997 applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. (1) Part 3‑90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Act (No. 1) 2002 and amended by: (2) Section 713‑50 of the Income Tax Assessment Act 1997 (about factors to consider in determining destination of distribution by non‑fixed trust) applies for the purposes of this Part in the same way as it applies for the purposes of Part 3‑90 of that Act. ### Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly‑owned subsidiary of the entity (the future head company) that became the head company of the group; or (ii) at some time during that period, the entity was a wholly‑owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (ii) it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (1) If a group is a transitional group, its head company may, subject to subsection (3), choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (3) If the choice is to be made after the end of the period mentioned in paragraph (2)(a) and before the end of the day mentioned in paragraph (2)(b), it cannot be made unless each entity in relation to which the conditions in subsection (5) are satisfied has agreed to it being made. (a) the entity (the leaving entity) ceased to be a subsidiary member of the group before the choice was made (in a subsection (3) case) or before the revocation took place (in a subsection (4) case); and (b) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; and (c) the asset had become that of the head company because that section applied when a chosen transitional entity (whether or not the same entity as the leaving entity) became a subsidiary member. Section 716‑855 applies for the purposes of this Division in the same way as that section applies for the purposes of Part 3‑90 of the Income Tax Assessment Act 1997. is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705‑B of that Act and with this Division. 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity Section 701‑10 (cost to head company of assets of joining entity) and subsection 701‑35(4) (setting value of trading stock at tax‑neutral amount) of the Income Tax Assessment Act 1997 do not apply to the assets of a chosen transitional entity. > Note: The fact that the head company inherits the entity’s history under section 701‑5 of that Act when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time. #### 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities (2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non‑chosen subsidiary) is worked out in a special way. (b) for each sub‑group (see subsection (6)) that exists in relation to the non‑chosen subsidiary—the sub‑group’s notional allocable cost amount (see subsection(5)) for the non‑chosen subsidiary. (4) The head company adjusted allocable amount for the non‑chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if; (b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of head company’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub‑group in relation to the non‑chosen subsidiary. (5) For each sub‑group that exists in relation to the non‑chosen subsidiary, there is a sub‑group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non‑chosen subsidiary if: (a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non‑chosen subsidiary and the entities comprising the sub‑group; and (c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub‑group membership interests (see subsection (6)) in relation to the sub‑group, and any such entity held those membership interests during the period when it actually held them; and (d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of chosen transitional entity’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub‑group. (6) If a chosen transitional entity holds membership interests in a non‑chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non‑chosen subsidiary: (a) the chosen transitional entity and each interposed non‑chosen subsidiary comprise a sub‑group in relation to the non‑chosen subsidiary (unless the non‑chosen subsidiary is included in a sub‑group in relation to another non‑chosen subsidiary); and (i) the membership interests that the chosen transitional entity holds directly in the non‑chosen subsidiary or in any of the interposed non‑chosen subsidiaries; (ii) the membership interests that each interposed non‑chosen subsidiary holds directly in the non‑chosen subsidiary or in any of the other interposed non‑chosen subsidiaries. #### 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities If any provision of the Income Tax Assessment Act 1997 would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply. > Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred. (1) This section has effect for the purposes of applying section 705‑70 (step 2 of allocable cost amount) of the Income Tax Assessment Act 1997 in relation to a transitional entity. (2) In spite of subsection 705‑70(1A) of that Act, if the amount of an accounting liability of the transitional entity would be different when it becomes an accounting liability of the transitional group, that difference is not taken into account in working out the amount of the liability. #### 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different (a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset (the roll‑over asset) for which there was: (ii) roll‑over relief under section 40‑340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and (i) became an asset of the head company when the transitional group came into existence because subsection 701‑1(1) (the single entity rule) of that Act applies; or differs at that time from what it would have been if the act, transaction or event that gave rise to the CGT event had not occurred in relation to the roll‑over asset; then the provisions mentioned in subsection (2) apply as if the act, transaction or event had not occurred in relation to the roll‑over asset. (a) the act, transaction or event mentioned in subsection (1) happened before a demerger and in connection with the demerger; and (b) before the transitional group came into existence, at least one of the following entities ceased to be a member of the demerger group because of the demerger: (i) the originating company in relation to the roll‑over, or the transferor in relation to the roll‑over relief, was a foreign resident; and (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as a transitional foreign‑held subsidiary of the group. #### 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets (1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied. (2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset. (a) the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and (b) former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset. (4) The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group. (6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses. #### 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets (b) just before the transitional group came into existence, the entity that became the head company held a pre‑CGT asset; and (d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre‑CGT asset and is held by the head company only because the entity is taken by subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company. (2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence. #### 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity (1) This section provides for an addition to the step 1 amount for working out under section 711‑20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity) that ceases to be a subsidiary member of the transitional group at a time (the leaving time), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701‑1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount for paragraph</span><span> </span><span>(2)(c)</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">If, because of the circumstances described in paragraphs</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(a) and (b):</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">The amount is:</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:180.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following provisions applied to the entity:</span></p><p class="Tablea"><span>(a) former section</span><span> </span><span>61A of the </span><span style="font-style:italic">Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(b) former Subdivision</span><span> </span><span>57</span><span>‑</span><span>I in Schedule</span><span> </span><span>2D to the</span><span style="font-style:italic"> Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(c) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(4) of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td><td style="width:148.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the amount treated as being the cost of the asset under that provision; and</span></p><p class="Tablea"><span>(b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>2</span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following subsections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span><span> applied to the entity:</span></p><p class="Tablea"><span>(a) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(5);</span></p><p class="Tablea"><span>(b) 58</span><span>‑</span><span>70(3)</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The amount treated as being the cost, or the first element of the cost, of the asset under that subsection</span></p></td></tr></tbody></table> ``` (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997, as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="4" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amounts and provisions for different dates of acquisition</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Date of the acquisition</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Amount</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Provision of Division</span><span style="font-weight:bold"> </span><span style="font-weight:bold">58 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> applying to the acquisition and the working out of the amount</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:76.7pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>160</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>220</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>After 30</span><span> </span><span>June 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>First element of the cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subsection</span><span> </span><span>58</span><span>‑</span><span>70(5)</span></p></td></tr></tbody></table> ``` > Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. > Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and ### Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: #### 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70‑45 to 70‑70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420‑51 to 420‑58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (a) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority‑owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority‑owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority‑owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority‑owned entity became a subsidiary member of the group, there was roll‑over relief under section 40‑340 of the Income Tax Assessment Act 1997. (a) while the asset is, because subsection 701‑1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, its tax cost setting amount is taken to be equal to the continuing majority‑owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711‑30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997. (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset becomes that of an entity (a new asset holder) other than the head company because subsection 701‑1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder) acquiring some or all of the membership interests in the new asset holder; and (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset is acquired by another entity (a new asset holder) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll‑over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value asset just before the acquisition; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 #### 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 (b) members of the consolidated group or the MEC group mentioned in subsection 104‑500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701‑1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701‑1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (3) If this section applies, neither subsection 104‑500(4) nor subsection 104‑500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year. ### Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C‑B); and (b) modifies certain rules in Part 3‑90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C‑C). > Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719‑2 and 719‑10 of this Act). 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership #### 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(ii) of that Act (see subsection 719‑2(3) of this Act). (b) a trust (a non‑resident trust) that does not meet the requirements in any item of the table in section 703‑25 of the Income Tax Assessment Act 1997. (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non‑resident company or a non‑resident trust; or Test entity must be a subsidiary member on assumption that non‑resident companies and non‑resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non‑resident company or non‑resident trust were a subsidiary member of the group. (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv). #### 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(iii) of that Act (see subsection 719‑2(3) of this Act). (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C‑10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3). If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C‑10 are met; and (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (ii) an entity that is a transitional foreign‑held indirect subsidiary of the group because of another application of this paragraph; Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign‑held indirect subsidiary would need to have satisfied the set of requirements in either section 701C‑10 or 701C‑15 (1) This Subdivision applies if an entity (the transitional foreign‑held joining entity) that is a transitional foreign‑held subsidiary or a transitional foreign‑held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time) the group comes into existence. (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign‑held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign‑held indirect subsidiary that becomes a subsidiary member at that time takes account of this. (a) section 701‑10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); apply, for the purposes of setting the tax cost of an asset of the transitional foreign‑held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign‑held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. > Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign‑held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign‑held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign‑held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign‑held subsidiary and the other entity. > Note 2: If the transitional foreign‑held joining entity is a transitional foreign‑held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705‑A of the Income Tax Assessment Act 1997, in its application in accordance with Subdivision 705‑B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company. Subsection 701‑35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax‑neutral amount) does not apply to the assets of the transitional foreign‑held joining entity if it is a transitional foreign‑held subsidiary. Section 701‑15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: (a) this section applies to each membership interest in the transitional foreign‑held subsidiary that is held by an entity (an eligible non‑resident) of a kind mentioned in subparagraph 701C‑20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign‑held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701‑1(2) of the Income Tax Assessment Act 1997 applies to the eligible non‑resident in the same way as it applies to the head company. Section 711‑5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: > Note: If the leaving entity is a transitional foreign‑held subsidiary (within the meaning of section 701C‑20 of the Income Tax (Transitional Provisions) Act 1997), this Division will, in accordance with subsection 701‑15(4) of this Act (see section 701C‑40 of the first‑mentioned Act), apply to membership interests that an eligible non‑resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity. (1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707‑C of the Income Tax Assessment Act 1997. (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period. (1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if: (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (d) the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997. (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: (1) The head company of a consolidated group may make a choice in the approved form to apply section 701D‑10 to another entity. (2) However, the head company cannot make that choice if subsection 701D‑10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (a) an asset of the head company because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701‑55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40‑77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40‑77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40‑285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount. (b) after the asset became an asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). > Note: The final entity will be different from the head company if an entity (the leaving entity) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40‑285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. > Note: The final entity will be entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701‑5 (the entry history rule) of that Act and perhaps also section 701‑40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity) became a subsidiary member of the group; and It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). > Note: In some cases, section 705‑47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40‑285(3) of this Act. If: (b) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and subsection 40‑285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701‑10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997. > Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997. (1) For the purposes of Part 3‑90 of the Income Tax Assessment Act 1997, this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960‑G of that Act whether the interest or right is a membership interest of the entity in the other entity. > Note: Under Subdivision 960‑G of the Income Tax Assessment Act 1997, a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001) apply to transactions in relation to the interest or right at the relevant time. Despite the amendments of section 703‑35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) If an entity (the joining entity) to which section 40‑75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time), this Subdivision applies in relation to: (ii) became assets of the head company of the group at the joining time because of section 701‑1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure. (1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). (2) If the joining entity could not deduct an amount under Subdivision 40‑B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701‑55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40‑35, 40‑37, 40‑40 or 40‑43 treated the joining entity as holding a notional asset. > Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705‑30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. (a) deductions under former Subdivision 330‑A, 330‑C or 330‑H of the Income Tax Assessment Act 1997, or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated an entity as holding because of the expenditure. (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); > Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40‑75(4) of this Act, but may have been reset since under Subdivision 40‑B of the Income Tax Assessment Act 1997. > Note 2: The effective life of a notional asset is specified by whichever one of sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act is relevant to the notional asset. (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (9) Section 705‑55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705‑45 of that Act. > Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705‑40 of the Income Tax Assessment Act 1997. (a) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701‑5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. > Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705‑305(3). (ii) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707‑A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member. 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value #### 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707‑320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor) other than the real loss‑maker mentioned in subsection 707‑315(1) of that Act for the bundle; and (b) both the real loss‑maker and the value donor became members of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (ca) neither the real loss‑maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (ii) a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (ii) section 713‑540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (2) It must have been possible for the real loss‑maker to have transferred the loss to the value donor under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss‑maker at the initial transfer time the amount worked out using the formula:  > Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707‑327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss‑maker to the transferee. > total of real loss‑maker’s non‑foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss‑makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) included in a bundle of losses: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. #### 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value (1) This section affects the calculation of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707‑325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936, in the bundle). > Note: This section does not affect the calculation of the real loss‑maker’s modified market value for other purposes (such as the real loss‑maker being a value donor for the purposes of another application of section 707‑325 of this Act). (3) One condition is that the event was an injection of capital directly into the real loss‑maker by the value donor mentioned in section 707‑325 of this Act. (c) that would have caused subsection 707‑325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss‑maker’s modified market value (even if no other events described in subsection 707‑325(4) of that Act had occurred), apart from this section. (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss‑maker (whether or not the event also involved either the value donor or the real loss‑maker); or (1) This section has effect for the purposes of working out under Subdivision 707‑C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707‑325, as if there were added to the modified market value of the real loss‑maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (c) the loss is not a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707‑A of that Act at the initial transfer time had the company: > Note: This section has effect even if the amount added to the real loss‑maker’s modified market value under section 707‑325 is nil because the value donor’s modified market value is nil. (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707‑325, as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (4) If the transferee mentioned in subsection 707‑325(1) chooses, sections 707‑310, 707‑335 (except paragraph 707‑335(2)(a)) and 707‑340 of the Income Tax Assessment Act 1997 (and subsections 707‑315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: > Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707‑325(1)(d) and (e) and subsection 707‑325(2) in an application of section 707‑325 separate from the application of that section mentioned in paragraph (1)(a) of this section. > Note: This means that a loss that provided a basis for section 707‑325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. (b) in connection with the requirement that it must have been possible for a company (the notional transferor) to transfer to another company (the notional transferee) for an income year a loss under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997. (b) ends immediately after the initial transfer time mentioned in subsection 707‑320(1) of the Income Tax Assessment Act 1997. > Note: For the purposes of identifying the trial year using the definition in section 707‑120 of the Income Tax Assessment Act 1997, the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time. (1) Subsection (3) of this section affects the calculation, under section 707‑325 of the Income Tax Assessment Act 1997 and section 707‑325 of this Act, of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (the formation time) the group became a consolidated group; and (b) the provisions described in subsection 707‑327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707‑327(1)(b) and (c) of this Act as if the bundle included the loss; and (d) subsection 707‑325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707‑325(1) of this Act chooses that this section apply in relation to the real loss‑maker. (2) Section 707‑325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. (3) Disregard for the purposes of subsection 707‑325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707‑325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or > Note: Disregarding such an event could have a direct or indirect effect on the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss‑maker’s modified market value calculated under section 707‑325 of the Income Tax Assessment Act 1997, if the real loss‑maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707‑325 of this Act to add an amount to the real loss‑maker’s modified market value for those purposes. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) that: (b) was transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from an entity other than the real loss‑maker. (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997. Disregard an event that is described in subsection 707‑325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707‑325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004. (1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss‑maker) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time) the transferee became the head company of a consolidated group; and (ii) the conditions in one or more of paragraphs 165‑15(1)(a), (b) and (c) did not exist in relation to the real loss‑maker; and (da) the real loss‑maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non‑transferred losses) of the same sort that the transferee made without a transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non‑transferred losses). (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. <table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Limit on utilising the losses</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For this income year:</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the losses that the transferee may utilise cannot exceed:</span></p></td></tr></thead><tbody><tr><td style="width:20.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:120.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The first income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span style="font-size:8pt; vertical-align:2pt">1</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The second income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) </span><span style="font-size:8pt; vertical-align:2pt">2</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the amount of the losses utilised for the income year mentioned in item</span><span> </span><span>1</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The third income year ending after the initial transfer time, or a later income year</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time</span></p></td></tr></tbody></table> ``` (4) Subdivision 707‑C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707‑A of that Act. > Note: This has 2 effects. First, Subdivision 707‑C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707‑A of that Act). (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). (7) This section does not limit the transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company. In working out when a choice may be made under subsection 707‑325(5), 707‑327(5), 707‑328A(4) or 707‑350(5), ignore losses to which section 713‑535 of the Income Tax Assessment Act 1997 applies. > Note: That section deals with losses transferred under Subdivision 707‑A of that Act from certain wholly‑owned subsidiaries of life insurance companies that are members of a consolidated group. Section 707‑405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act. (1) This section reduces the adjustable value of a notional asset that section 40‑35, 40‑37, 40‑38, 40‑40 or 40‑43 treats the head company of a consolidated group as holding, if: (b) that section treats the leaving entity as holding a notional asset because of section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997. > Note: Section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time. The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences. (1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event) happening involving an entity (the originating entity) and another entity (the recipient entity) if: (a) the event occurs in connection with a life insurance company (the member life insurance company) becoming a member of a consolidated group; and (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest) in a company or in another trust. (a) a life insurance company transfers an asset (also the original asset) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320‑200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset) to its segregated exempt assets where, apart from this Subdivision, section 320‑255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event) is made in connection with the life insurance company (also the member life insurance company) becoming a member of a consolidated group. (1) This Subdivision applies only if the originating entity (for a section 713‑505 case) or the life insurance company (for a section 713‑510 case) chooses that it apply. (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713‑510 of the Income Tax Assessment Act 1997; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713‑510 of the Income Tax Assessment Act 1997; and (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs. This Act, and the Income Tax Assessment Act 1997, apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group. (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain) that the originating entity would have made as a result of the deferral event is disregarded; and (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount) under paragraph 320‑15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (1) This section operates if, after the deferral event happens, another event (the new event) happens where the new event is: (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (i) the original asset being transferred to or from the company’s virtual PST under section 320‑180, 320‑185 or 320‑195 of the Income Tax Assessment Act 1997; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320‑235, 320‑240 or 320‑250 of that Act; or (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. > Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713‑505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (1) For a section 713‑505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713‑535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: (a) an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group at a time (the leaving time); and (b) but for the cessation of membership and section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision. Sections 716‑340 and 716‑345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. <table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:345.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Extended operation of sections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 1</span><br><span style="font-weight:bold">Sections</span><span style="font-weight:bold"> </span><span style="font-weight:bold">716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">340 and 716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">345 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> operate in relation to:</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 2</span><br><span style="font-weight:bold">In the same way as they operate in relation to:</span></p></td></tr></thead><tbody><tr><td style="width:5.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:161.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>46</span><span>‑</span><span>90 of that Act</span></p></td><td style="width:156.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>40</span><span>‑</span><span>455 of that Act</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software pool created under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure allocated to a software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Software, expenditure on which was in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>In</span><span>‑</span><span>house software, expenditure on the development of which is allocated to a software development pool</span></p></td></tr></tbody></table> ``` (1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: Section 703‑30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004. (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time) a wholly‑owned subsidiary of the entity that became the head company of the group (the head entity), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier‑1 company of the group at the formation time. Despite the amendment of section 719‑30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) Section 719‑160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719‑160(3) of the Income Tax Assessment Act 1997. (3) However, that effect of section 719‑160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division. (2) Paragraphs 701‑1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier‑1 company at the time the MEC group came into existence. (a) the entity and one or more other entities were members of a potential MEC group as eligible tier‑1 companies, throughout the period: (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier‑1 company, at the time the transitional group came into existence. To avoid doubt, sections 707‑325 and 707‑327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719‑305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707‑A of that Act. Subsection 719‑325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006. (1) A reference in an agreement to item 25 of the table in subsection 721‑10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: (1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: Division 725 applies to a scheme entered into on or after 1 July 2002. It also applies to a scheme entered into on or after 27 June 2002, but only if: ### Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (1) Division 727, as inserted by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 and amended by the New Business Tax System (Consolidation and Other Measures) Act 2003, applies to a scheme entered into on or after 1 July 2002. (b) a presumed indirect value shift that happens under the scheme and affects a realisation event that happens on or after 1 July 2002. (a) the economic benefits taken into account in determining that the scheme has resulted in that indirect value shift or presumed indirect value shift include economic benefits provided by: > Note: In that case, the consequences of the trigger event are worked out under Division 138 or 139 of the Income Tax Assessment Act 1997: see items 13 and 14 of Schedule 15 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002. (1) An indirect value shift does not have consequences under Division 727 of the Income Tax Assessment Act 1997 if, to the extent of at least 95% of their total market value, the greater benefits consist entirely of: (a) a right to have services that are covered by section 727‑240 of that Act provided directly by the losing entity to the gaining entity; or (d) if the losing entity’s 2002‑2003 income year ends before 30 June 2003—the start of the losing entity’s 2004‑2005 income year. (2) For the purposes of section 727‑850 (about a presumed indirect value shift affecting a realisation event) of the Income Tax Assessment Act 1997, subsection (1) of this section applies to the presumed indirect value shift: #### 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (2) Paragraph 727‑470(2)(a) of the Income Tax Assessment Act 1997 (as in force immediately before the commencement of this section) continues to have effect in relation to the indirect value shift as if the repeals and amendments made by Schedule 1, Parts 1 and 2 of Schedule 3 and Schedule 8 to the Tax Laws Amendment (Small Business) Act 2007 had not been made. ## Division 615 Roll‑overs for business restructures ## Subdivision 615 ‑A—Modifications for roll‑overs between the 2011 and 2012 Budget times ## 615‑5 Roll‑overs between the 2011 and 20 615‑5 Roll‑overs between the 2011 and 2012 Budget times Subdivision 615‑C of the Income Tax Assessment Act 1997 applies to you with the modifications set out in this Subdivision if you chose to obtain a roll‑over involving \*shares or units that: (b) were your trading stock, or revenue assets, at the time immediately before that disposal, redemption or cancellation. ## 615‑10 Modifications—when additional con 615‑10 Modifications—when additional consequences can apply (1) Disregard subparagraph 615‑45(a)(ii), and paragraph 615‑45(b), of the Income Tax Assessment Act 1997 if the roll‑over relates to \*shares that were disposed of, redeemed or cancelled. ## 615‑15 Modifications—trading stock 615‑15 Modifications—trading stock (2) For each of the \*shares in the interposed company that you acquired in return for those of your shares or units in the original entity that were your \*trading stock at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  ## 615‑20 Modifications—revenue assets 615‑20 Modifications—revenue assets (2) For the purpose of calculating any profit or loss on a future disposal, cessation of ownership, or other realisation of a \*share in the interposed company that you acquired in return for those of your shares or units in the original entity that were \*revenue assets at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  ## Division 620 Assets of wound‑up corporation passing to corporation with not significantly different ownership ## Subdivision 620 ‑A—Corporations covered by Subdivision 124‑I ## 620‑10 Application of Subdivision 620‑A 620‑10 Application of Subdivision 620‑A of the Income Tax Assessment Act 1997 Subdivision 620‑A of the Income Tax Assessment Act 1997 applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. ## Part 3 ‑90—Consolidated groups (a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and (2) Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001 (the new Act) applies to the plant on this basis: (a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant’s opening adjustable value; and (b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and (c) if you excluded an amount from your assessable income under section 42‑290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999—the cost of the plant, and its opening adjustable value, are reduced by that amount; and (d) if subparagraph (1)(b)(ii) applies to you—you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi‑owner of the plant under the former Act continue. (3) If you were using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis: (a) for the diminishing value method—replace the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate you were using; and (i) replace the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate you were using; and (ii) increase the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note 1: Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced. > Note 2: Small business entities can choose to work out the decline in value of their depreciating assets under Division 328. (a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or (3) If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40‑70(1) or 40‑75(1) of the new Act that includes the plant’s effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and (2) For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets. (3) For a case where the plant is merged into another depreciating asset, section 40‑125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it. (b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and (a) you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and (b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU’s opening adjustable value. (1) Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001. (2) For a unit of software for which you were deducting amounts under Subdivision 46‑B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis: (d) you must use the same effective life you were using under Subdivision 46‑B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001. (1) This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day. (b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and (c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and (1) This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001. > Note: Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8). (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330‑80 of the former Act for your income year ending on 30 June 2001; and (c) in applying the formula in section 40‑75 of the new Act for the income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The remaining effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these: (i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and (ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (7) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and (b) the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of expenditure incurred in carrying on eligible quarrying operations—the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (i) you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day) after 30 June 2001; or (ii) the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day) after 30 June 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which the start day occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year. there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (1) This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330‑H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and (c) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (i) any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset); (i) any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (4) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (4) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (b) the expenditure would have been transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330‑H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for your income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (1) Despite subsections 40‑35(5), 40‑38(5) and 40‑40(4), there is no additional decline in the value of the notional asset referred to in those subsections if: (a) apart from this section, subsection 40‑35(5), 40‑38(5) or 40‑40(4) would apply because the real asset referred to in that subsection is disposed of; and (a) at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373‑35 of the former Act; and (b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day. (a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and (1) Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time). (2) Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time. (a) you have deducted or can deduct an amount under Subdivision 387‑G of the former Act for an amount (the qualifying amount) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and (b) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and (1) This section applies to you if you have deducted or can deduct an amount under Subdivision 400‑A of the former Act for an amount (the qualifying amount) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400‑A of the former Act. (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and (c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400‑15(3) of the former Act; and (1) Units of plant that you had allocated to a pool under Subdivision 42‑L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act. (a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and (c) in applying the formula in section 40‑70 of the new Act for your income year in which 1 July 2001 occurs—it has a base value equal to that opening adjustable value; and (d) you replace the component in the formula in subsection 40‑70(1) of the new Act that includes an asset’s effective life with the pool percentage you were using for the pool; and (e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40‑115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and (f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset. (3) An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item). > Note 1: You work out the decline in value of an item removed under this subsection under Subdivision 40‑B of the new Act, using the cost for it worked out under section 40‑205 of the new Act. (b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset. (2) The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year) in this way: (a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and (b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section. (a) for a unit of plant (including IRUs and expenditure on software that is not pooled)—its undeducted cost at the end of 30 June 2001; or (b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence—the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or (c) for transport capital expenditure—the entity’s amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or (d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (e) for expenditure on evaluating the impact on the environment of a project—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (f) for assets that were pooled under Subdivision 42‑M or 42‑L of the former Act—the closing balance of the pool at the end of 30 June 2001. (4) The asset’s base value for applying the formula in section 40‑70 of the new Act for the diminishing value method is that opening adjustable value. (5) The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an item of plant for which you were using the prime cost method—using the rules in section 40‑10 of this Act; and (c) for a unit of software for which the entity was deducting amounts under Subdivision 46‑B of the former Act—using the rules in subsection 40‑25(2) of this Act; and (f) for an amount of expenditure on evaluating the impact on the environment of a project—using the rules in section 40‑55 of this Act. (6) The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an amount of unrecouped expenditure under Division 330 of the former Act—using the rules in section 40‑35 of this Act; and (b) for an amount of transport capital expenditure under Division 330 of the former Act—using the rules in section 40‑40 of this Act; and (7) The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act. (a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑C of the former Act; or (b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑H of the former Act; or (c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387‑B of the former Act; or (d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; or (e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365. (9) The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001. (10) You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount). (11) You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount. (1) Subsections 40‑65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened: (b) you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act. (a) paragraph 40‑65(6)(a) of the Income Tax Assessment Act 1997 included both events set out in subsection (1) of this section; and (b) subsections 40‑65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events. (1) A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936. (2) An amount you have deducted or can deduct for a water facility under Subdivision 387‑B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40‑F of the new Act. (3) A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936. (a) you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40‑115 (about splitting a depreciating asset) or 40‑125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and (b) it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40‑72 of that Act; (2) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if: (c) it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40‑72 of that Act. (3) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset) before 10 May 2006 if: (b) the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and (d) it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40‑72 of that Act. (a) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you: (b) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001. (2) If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act. (3) Otherwise, Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section. (a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or (b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or (ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life. (1) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001. > Note: If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40\. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997. (1A) Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001. (1B) Subsection (1) applies to a mining, quarrying or prospecting right (the new right) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if: (i) the other company is a member of the same wholly‑owned group as the original holder and was a member of that group just before that day; and (ii) the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer. (1D) Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if: (b) the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001. (a) you acquired, under an interest realignment arrangement, an interest (a new interest) in a mining, quarrying or prospecting right; and (b) the interest was acquired in exchange for one or more other interests (old interests) in other mining, quarrying or prospecting rights; and Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001. (a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or (b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership; the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act. (3) An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that: (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act. (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act. (6) Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243. (7) An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if: (a) you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and (8) The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section. (c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act. (2) Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001. A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act. if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011. (2) The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011. (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset for an income year is the amount worked out under section 40‑130 if: (a) the income year is the year in which you start to use the asset, or have it installed ready for use, for a taxable purpose; and (b) subsection (2) (about businesses with turnover less than $500 million) applies to you for the year and for the income year in which you started to hold the asset (if that was an earlier year); and > Note 1: An effect of paragraph (1)(a) is that this Subdivision only applies to one income year per asset. See also subsection 40‑135(1). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $500 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. Exception—assets for which the decline in value is worked out under section 40‑82 or Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (3) However, this section does not apply to a depreciating asset for an income year if you work out the decline in value of the asset for the income year under any of the following: (1) For the purposes of paragraph 40‑120(1)(c) and section 328‑182, you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you: > Note: Section 328‑182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997. (i) entering into a contract under which you hold the post‑12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑12 March 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post‑12 March 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (8) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (9) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (10) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (1) For the purposes of section 40‑120, the decline in value for the income year in which paragraph 40‑120(1)(a) is satisfied (the current year) is: > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 12 March 2020 to 30 June 2020 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2020 to 30 June 2021. (a) 50% of the asset’s cost as at the end of the current year, disregarding any amount included in the second element of the asset’s cost after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997, assuming its cost were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (3) However, the amount worked out under subsection (2) for an income year cannot be more than the amount that is the asset’s cost for the year. (a) 50% of the sum of the asset’s opening adjustable value for the current year and any amount included in the second element of its cost for that year, disregarding any amount included in that second element after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997 assuming: (ii) for the prime cost method—the component “Asset’s \*cost” in the formula in subsection 40‑75(1) of that Act (as adjusted under that section) were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (b) for the prime cost method—the sum of its opening adjustable value for the income year and any amount included in the second element of its cost for that year. (1) The decline in value of a depreciating asset is not worked out under this Subdivision for an income year if this Subdivision already applied in working out the decline in value of the asset for an income year. (2) For an income year later than the year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (3) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (4) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) You may choose that the decline in value of a particular depreciating asset for an income year, and subsequent income years, is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the first income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. If this Subdivision applies to work out the decline in value of a depreciating asset you hold for an income year, no other provision of this Act or the Income Tax Assessment Act 1997 applies to work out that decline in value. (1) For the purposes of this Subdivision, you are covered by this section for a depreciating asset if, on or before 30 June 2023: (2) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (3) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or Exception—assets for which the decline in value is worked out under Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (a) the asset is allocated to a low‑value pool, or expenditure on the asset is allocated to a software development pool (see Subdivision 40‑E of the Income Tax Assessment Act 1997); or (b) you or another taxpayer has deducted or can deduct amounts for the asset under Subdivision 40‑F of the Income Tax Assessment Act 1997 (about primary production depreciating assets). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $5 billion; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this section. (ii) if the 2019‑20 income year ends on or before 6 October 2020—the sum of your ordinary income (if any) and statutory income (if any) for the 2019‑20 income year; and (c) the sum of the amounts worked out under subsection (3) for the 2016‑17, 2017‑18 and 2018‑19 income years exceeds $100 million. (b) next, work out the cost of each of those assets (including any amounts included in the second element of the asset’s cost at a time that is in the income year); (4) For the purposes of subsection (3), disregard an asset if, at the time you first used the asset, or had it installed ready for use, for a taxable purpose: (a) it was not reasonable to conclude that you would use the asset principally in Australia for the principal purpose of carrying on a business; or (5) For the purposes of paragraph (3)(b), to work out the cost of a depreciating asset that is capital works (see section 43‑20 of the Income Tax Assessment Act 1997): (a) disregard section 40‑45 of that Act and work out the cost of the capital works using Subdivision 40‑C of that Act; and (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under subsection (3) if: (a) where section 40‑155 covers you for the current year (regardless whether section 40‑157 also covers you for the current year)—an exclusion applies to you and the asset for the current year under section 40‑165 (about exclusions for businesses with turnover of $50 million or more); or (ii) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s start time occurs in the current year—the asset’s cost as at the end of the current year, disregarding any amount included in the asset’s cost after 30 June 2023; or (b) if the asset’s start time occurred in an earlier year—the sum of its opening adjustable value for the current year and any amount included in the second element of its cost for the current year, disregarding any amount included in the asset’s cost after 30 June 2023. > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 6 October 2020 to 30 June 2021 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2021 to 30 June 2022. (a) where paragraph 40‑160(2)(a) applies—section 40‑155 would not cover you for the income year if the reference in that section to $5 billion were instead a reference to $50 million; and (i) entering into a contract under which you hold the post‑6 October 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑6 October 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of satisfying paragraph 40‑160(1)(a) for the post‑6 October 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you already satisfied paragraph 40‑160(1)(a) of this Act for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (9) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (1) For the purposes of subsections 40‑160(2) and 40‑170(1A), an exclusion applies to you and an asset for an income year if any of the exclusions in this section applies in relation to the asset. (4) This exclusion applies in relation to the asset if the asset is available for use, at any time in the income year, by any of the following: (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under this section if: (ii) you started to use the asset, or have it installed ready for use, for a taxable purpose in an earlier income year; and (b) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under section 40‑82 of the Income Tax Assessment Act 1997—the amount worked out under subsection (3); or (b) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under Subdivision 40‑BA of this Act—the amount worked out under subsection (4); or Assets affected by section 40‑82 of the Income Tax Assessment Act 1997 (about assets costing less than $150,000, medium sized businesses) (a) the amount that would be the asset’s decline in value for the year under section 40‑82 of the Income Tax Assessment Act 1997, assuming the reference in subparagraph 40‑82(3A)(b)(ii) of that Act to 31 December 2020 were instead a reference to the 2020 budget time; and (a) the amount that would be worked out under paragraph 40‑130(2)(a) or (4)(a) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(a) and (4)(a) to 30 June 2021 were instead references to the 2020 budget time; and (c) the amount that would be worked out under paragraph 40‑130(2)(b) or (4)(b) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(b) and (4)(b) to “the amount worked out under paragraph (a)” were instead references to “the amounts worked out under paragraphs 40‑170(4)(a) and (b)”. (a) the amount that would be the asset’s decline in value for the year under Division 40 of the Income Tax Assessment Act 1997, disregarding any amounts included in the eligible second element worked out under section 40‑175 of this Act for the asset for the year; and The amount worked out under this section (the eligible second element) for a depreciating asset for an income year is the sum of any amounts included in the second element of the asset’s cost at a time that is in both of the following periods: (1) For an income year later than a year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (2) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (3) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) This section applies if the decline in value for a depreciating asset for an income year is worked out under this Subdivision, and at a time (the balancing adjustment time) in a later income year: (i) it becomes not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (b) none of the requirements in paragraphs 40‑295(1)(a), (b) or (c) of the Income Tax Assessment Act 1997 are satisfied in relation to the asset. (2) For the purposes of Subdivision 40‑D of the Income Tax Assessment Act 1997 assume that, at the balancing adjustment time, you stop using the asset, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again. (3) For the purposes of section 40‑180 of the Income Tax Assessment Act 1997 assume that the reference in item 3 of the table in subsection 40‑180(2) of that Act to “because you stop using it for any purpose expecting never to use it again” were instead a reference to “because of section 40‑185 of the Income Tax (Transitional Provisions) Act 1997”. (4) If a balancing adjustment event happens to a depreciating asset you hold because of this section, this Subdivision cannot apply to work out the decline in value of the asset for a later income year. (1) You may choose that the decline in value of a particular depreciating asset for an income year is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year. (1) Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40. (a) you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset: (ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and (4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day. (5) The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if: (i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or (ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and  > sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose. (7) Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens: (a) if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b). (i) an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and (ii) the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and (3) The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount. (a) on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and (c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and (ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal; (2) There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal. (3) Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount. If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997. (a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and (b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and: (i) the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, the R&D entity is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—a clawback amount under section 355‑447 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑466 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. (b) section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions. > Note 2: The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and: (i) the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset; (ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, an R&D entity (the partner) that is a partner in the R&D partnership and is entitled to one or more new law deductions for one or more income years for the asset, is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—a clawback amount under section 355‑449 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑468 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s new law deductions mentioned in paragraph (2)(b) of this section. (4) Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event. > Note: Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions. (1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant. (b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and (3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it. (a) there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and (b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act. (2) The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor. (3) The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and <table cellspacing="0" cellpadding="0" style="width:364.2pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:353.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading" style="page-break-inside:avoid"><span>Conditions for small business taxpayers retaining accelerated rates</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Condition</span></p></td></tr></thead><tbody><tr><td style="width:21.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:321.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>The transferee must have been a small business taxpayer for the income year (the </span><span style="font-weight:bold; font-style:italic">start year</span><span>) that includes the time when the entity first used the plant, or first had it installed ready for use.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>2</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>At that time, neither of these applies:</span></p><p class="Tablea"><span>(a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;</span></p><p class="Tablea"><span>(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection</span><span> </span><span>(5).</span></p></td></tr></tbody></table> ``` (4) For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership. (5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement. (a) for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or (i) replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and (ii) increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).  (b) if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11). (c) that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and (d) that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and (e) that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity. (a) for taxable supplies (if any) the entity makes during the year in the course of carrying on a business—the value (as defined by section 9‑75 of the GST Act) of the supplies; and (b) for other supplies the entity makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies. (1) The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for: (a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (c) for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or (d) for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant. (3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115. (4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain. (5) Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee. (i) the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or (a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and (1) A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act. (2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year. For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if: Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act. (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset): and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply. (i) for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or (ii) for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and (c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act. (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and (2) Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act. The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under: (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on: (2) You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act. (3) A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under: (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and (2) Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act. A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act. The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001. If: (d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act; (a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and (a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and (b) the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and (c) paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997. Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years. (1) For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section. (b) the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (b) that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (1) There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea" style="page-break-after:avoid"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a); and</span></p><p class="Tablea" style="page-break-after:avoid"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (b) disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (f) an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division. (4) If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45‑5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest. (5) If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45‑10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest. Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Disregard the use of the following amounts in determining (for the purposes of Subdivision 50‑A of the Income Tax Assessment Act 1997 whether a fund established before 1 July 1997 operates and pursues its purposes in Australia: Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years. (2) However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date. Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if: (b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time. Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years. 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years (1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act. <table cellspacing="0" cellpadding="0" style="margin-left:56.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:258.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Application provisions for specific sections</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-size:9pt; font-weight:bold">Item</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">This section of the </span><span style="font-size:9pt; font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-size:9pt; font-weight:bold"> ...</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">Applies as described in this provision of this Act ...</span></p></td></tr></thead><tbody><tr><td style="width:24.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55(1)</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>95</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>8</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td></tr></tbody></table> ``` (a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and (b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997. > Note: Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year. (b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997; sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997). > Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock. (3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997. (a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and (b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936; > Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal. #### 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997. (1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year. (2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936. (3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year: (a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners; (b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed. > Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year. > Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year. (b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year; the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year. (2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. (3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2). #### 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997. #### 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business (1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. (2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity. > Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997. (1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. (2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value. > Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997. #### 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year. (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. > Note: Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. > Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given). (5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act). (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment. > Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%. (5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%. (6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.  > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section. (b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4). Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age. Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later. Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies. Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3. (4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997. (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%. > Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986. (5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D. > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. (a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and (b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year). (3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and (2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual: (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income. > Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F. > Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997. > Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997. #### 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 (1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012. (2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies. (3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act. (b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009. (2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if: (i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest; (iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or (i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest; (iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009. (2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time. (4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2): (a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and (b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being: (ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and (c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and (d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if: (i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or (ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and (e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and (i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and (ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and (g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest. (a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced: (i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or (ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and (b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5. (2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right. (3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right. (2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. (3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section. Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years. (1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision. > Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision). > Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936). > Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997. (a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936. (1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936. (2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997. > Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997. (3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and (d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; (f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time. > Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and (d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015. (a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or (4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if: (b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset. The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year. (a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and (1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied: (b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and (d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works). (3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936. Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936. (b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006. (2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement. > Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement. Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual: (b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her. 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act (1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee). (2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year: (3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection. #### 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997. Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936). (2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if: (a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; (a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011); (b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986. > Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section. If: (a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and (b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936; Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995. (1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997. (2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997. (3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997. (4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997. > Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one. Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year: (a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and (b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year; the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation. Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset. (b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section); > Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply. (1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if: (a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and (2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value. (4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value. (a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997. (2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less. (1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936: (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. (1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if: (2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by: (a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or (a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or (2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period. Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year: If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997. (1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002. (2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset. (3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required. (i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and (ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and (c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and (f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997). (a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or (1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:  > total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part. (a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or (2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section. (3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1). (1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences. > Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997. (c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets). (4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act. (5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act. Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement. (a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and (2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time. (a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and (ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs. (2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer. (a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and (b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest; (2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event. (3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly. (4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly. <table cellspacing="0" cellpadding="0" style="width:362.55pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:351.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Creating a CGT asset</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">CGT event number</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Applicable amount</span></p></td></tr></thead><tbody><tr><td style="width:50.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D1</span></p></td><td style="width:290.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the incidental costs the originating company incurred that relate to the CGT event</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D2</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the option</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D3</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the right</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>F1</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred on the grant, renewal or extension of the lease</span></p></td></tr></tbody></table> ``` (5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day. A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision. (a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996. (b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. (b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend. (3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities. (1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company. (2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred. (3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company. (1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of: (2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of: (3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note. (1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised. (b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and (ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act. You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and (b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996. (c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and (c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over. (3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. (a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and (c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and (d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act. (3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division. Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years. A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: (1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day. (2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice. (a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and (b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and (a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and (b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and (c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group. (5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004. (6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection. (1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss): (b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions); and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time: (i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or (e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and (f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and (ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred; (2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if: (a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these: (i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset; (ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and (3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act. (a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and (b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section. (5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of: (a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and (b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset. Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. (ii) that could have been deducted, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the deduction had not been limited by the company’s income for that income year; and (ii) that could have been applied, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the application of the loss had not been limited by the company’s capital gains for that income year. 170‑C Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred #### 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years. #### 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). #### Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997. Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997. If: (a) all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (d) that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and (e) the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place. Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years. > introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament. Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day. #### Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting #### 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B. (1) The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day. (2) No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted. #### 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting (1) Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if: (a) the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and (b) none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount. (2) No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount. (1) This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account. (2) For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. > Note 2: If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60. (3) For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)). (4) For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. (5) The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if: (a) during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and (b) the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section. (a) the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and (b) during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components. (7) For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. (8) Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it: (b) the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component. (9) Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component. (10) For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002: (b) lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination; (c) a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination); (e) the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination); (f) the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination). Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period: 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows: (a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and (i) in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and (ii) in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. > Note: A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002. #### 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002: (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:23.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:87.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A franking surplus</span></p></td><td style="width:220.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.009.png" width="175" height="58" alt="Start formula Amount of the class A franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.010.png" width="190" height="56" alt="Start formula Amount of the class B franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.011.png" width="190" height="56" alt="Start formula Amount of the class C franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` #### 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus): (a) a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Original surplus</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:85.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>class A</span></p></td><td style="width:220.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.012.png" width="169" height="38" alt="Start formula Amount of the original class A surplus times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.013.png" width="169" height="38" alt="Start formula Amount of the original class B surplus times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.014.png" width="169" height="38" alt="Start formula Amount of the original class C surplus times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (4) If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit): (a) a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company. (5) The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking deficit into 1997 Act franking debit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Original deficit</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking debit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(4)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:70.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A</span></p></td><td style="width:235.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.015.png" width="164" height="38" alt="Start formula Amount of the original class A deficit times start fraction 39 over 61 end fraction end formula "></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.016.png" width="164" height="38" alt="Start formula Amount of the original class B deficit times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.017.png" width="164" height="38" alt="Start formula Amount of the original class C deficit times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (2) A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if: (c) the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions. (3) The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if: (b) the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and (1) While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit. (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year. (3) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: > Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act. (1) The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account. (a) a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time; (3) If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if: (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity. #### 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If: the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time. (1) Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections. (2) If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year. Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year. Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year. (5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in: that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement. (6) The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (7) The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (2) The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (3) The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (i) are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and (a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and (b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section. (a) whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and (1) This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002. (a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and (3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded. (1) This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002; (2) If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (3) If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (4) If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. (5) If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows: (a) any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and (i) in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and (ii) in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. #### 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF.  #### 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act). (2) If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus): (a) a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF. (4) If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit): (a) a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF. This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period). (1) The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period: (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (1) The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period. (2) The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner. (3) The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5. (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and (d) the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner; the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received. (3) A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time: (1) A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends. (2) However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period. (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (a) the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed: (d) the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and (e) the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return. (2) The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day. (1) The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period. (2) The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made. Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period. (b) on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax); the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed: (c) the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and (d) the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return. (2) The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day. The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period: If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day. If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and If: (a) a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and (b) the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment; In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment. If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment. The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with. If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953. (1) Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period. (a) the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and (b) the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3); the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on: (c) if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or If: Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax. Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division. If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997. (a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day: (3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002. (a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002: > Note: As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date. (b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997. In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003. (1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year. (a) a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of: (i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time; (iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period; (2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if: (b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time: (ii) the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. > Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. > Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. (7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table: <table cellspacing="0" cellpadding="0" style="width:365.35pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount of the franking credit and the exempting debit</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">If:</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the credit and debit is:</span></p></td></tr></thead><tbody><tr><td style="width:22.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The period starts immediately after 7.30</span><span> </span><span>pm by legal time in the Australian Capital Territory on 13</span><span> </span><span>May 1997</span></p></td><td style="width:141.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Both these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was not in surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>All these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was in surplus at the start of the period;</span></p><p class="Tablea"><span>(c) the surplus in the account at the switch time is greater than the surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the franking surplus in the Australian company’s franking account at the switch time; and</span></p><p class="Tablea"><span>(b) the franking surplus in the Australian company’s franking account at the start of the period</span></p></td></tr></tbody></table> ``` (a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and (b) the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period. Subdivision 235‑I of the Income Tax Assessment Act 1997 applies to assets acquired by the trustee of an instalment trust in: (1) Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years. (2) However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time). (3) The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997. Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997. (2) Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in: (1) Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that: (b) is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose. (a) if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007. > Note: To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997. (b) contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option; the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option. (3) For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5). (4) If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is: (a) the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less (b) the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest. (5) If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is: (6) If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil. (1) If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one. (2) If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year. (3) If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year. (a) for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and (b) for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year: Step 1. Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. Step 2. Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3). Step 3. If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year. > Note: Example: Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75): (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred: (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times: (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate. Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008. (a) the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and (b) the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities: (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (i) the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or (ii) the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and (f) none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made: (i) Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event; (ii) a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year. (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (b) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (c) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year #### 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year (a) the requirements set out in paragraphs 275‑610(1)(a), (b) and (c) of the Income Tax Assessment Act 1997 are satisfied in respect of an amount of non‑arm’s length income of a managed investment trust in relation to an income year; and (b) the managed investment trust became a party to the scheme mentioned in paragraph 275‑610(1)(a) of that Act before the day on which the Bill that became the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 was introduced into the House of Representatives; and Division 276 of the Income Tax Assessment Act 1997 as inserted in that Act by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (the amending Act) applies as set out in subitem 1(1) of Schedule 8 to the amending Act. (b) if the trustee of the trust has made a choice for the purposes of paragraph 1(1)(b) of Schedule 8 to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016—the first income year starting on or after 1 July 2015; or (c) if the trustee of the trust has made a choice for the purposes of subparagraph 276‑10(1)(e)(i) of the Income Tax Assessment Act 1997 in respect of the 2016‑17 income year—that income year. (c) the trust is an AMIT for an income year (the discovery year) that is the starting income year or a later income year. (1) This section applies if the trust has an under or over of a character in the discovery year relating to the base year. (b) if, at a time, the trust sent its members distribution statements for an income year that is prior to the starting income year—assume that the trust sent those members AMMA statements for that income year at that time. (3) For the purposes of Division 276 of the Income Tax Assessment Act 1997, treat the under or over mentioned in subsection (1) as an under or over of the AMIT, in the discovery year relating to the base year, of the character mentioned in that subsection. (a) had the under or over mentioned in subsection (1) been discovered before the starting income year, this Act would have operated to produce a particular effect (the pre‑AMIT scheme effect) for the base year in relation to the amount or amounts reflected in the under or over; and 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT #### 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT (b) working out the amount (if any) of the entity’s capital gain under subsection 104‑70(4) of the Income Tax Assessment Act 1997. (3) For the purpose of working out the amount of the non‑assessable part mentioned in paragraph 104‑70(1)(b), treat the following provisions as being in operation at the time the payment was made: (b) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in paragraph (a). (4) Subsection (3) does not apply to the extent (if any) that the entity, in the income tax return that it lodged for the income year in which the payment was made, included the amount of the payment in its assessable income for that income year. (5) For the purposes of section 118‑20 of the Income Tax Assessment Act 1997, treat this section as being in Part 3‑1 of that Act. (2) The Commissioner cannot amend the entity’s assessment for the income year in which the payment was made in a particular way if: (b) the Commissioner could not amend the assessment in that way if the following provisions were in operation at the time the payment was made: (ii) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in subparagraph (i); and Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82‑10F). (2) The object of this section is to apply (with modifications) provisions limiting deductibility in respect of certain contributions made during the period that: (a) Subdivisions AA and AB of Division 3 of Part III of the Income Tax Assessment Act 1936, as in force just before they were repealed by the Superannuation Legislation Amendment (Simplification) Act 2007; (b) any other provision of the Income Tax Assessment Act 1936, or of any instrument made under that Act, to the extent that it relates to the operation of those Subdivisions; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of those Subdivisions. (b) the deduction limit mentioned in section 82AAC for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (c) the deduction limit mentioned in section 82AAT for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (d) Division 290 of the Income Tax Assessment Act 1997 did not apply to contributions made during the income year mentioned in paragraph (a). (2) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of a defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection and subsection (4), the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 5 September 2006; (b) the defined benefit interest mentioned in paragraph (2)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 5 September 2006, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (2)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (4) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of the defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection, the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 12 May 2009; (b) the defined benefit interest mentioned in paragraph (4)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 12 May 2009, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (4)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (1) The object of this section is to apply (with modifications) provisions relating to excess non‑concessional contributions tax in respect of certain contributions made during the period that: (b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision. (ea) in a case where paragraph 292‑95(1)(b) of that Act would have allowed the contribution mentioned in that paragraph to be made at a time within that period—that paragraph allowed the contribution to be made on or before 30 June 2007; and (f) paragraph 292‑95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and (fa) in a case where subsection 292‑100(2), (4), (7) or (8) of that Act would have allowed the contribution mentioned in that subsection to be made at a time within that period—that subsection allowed the contribution to be made on or before 30 June 2007; and (g) paragraph 292‑100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and (h) contributions made during that period that are covered under section 292‑100 of that Act reduce the person’s CGT cap amount for the 2007‑2008 financial year in accordance with subsection 292‑105(2) of that Act (and despite subsection (1) of that section); and (i) if the conditions in subsection (4) are satisfied—the person’s excess non‑concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and (b) the Commissioner gives the person a transitional release authority under subsection 292‑80A(2) in response to the application; and (c) the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292‑80B within 21 days after the date of the release authority; and (d) the superannuation provider pays the person the amount required under section 292‑80C in relation to the transitional release authority. (b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act). (6) The amount to be included in the first person’s amount of non‑concessional contributions under subparagraph (3)(b)(ii) is the sum of: (a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and (b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made. (c) under Division 295 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)), the contribution is included in the assessable income of the superannuation provider in relation to the superannuation plan to which the contribution is made; and (8) For the purposes of paragraph (7)(b), treat the person as an employee of the other entity if the person would be treated as an employee of the other entity under Division 290 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)). (1) A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007. (2) The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292‑80(3)(b)(i), the person would have excess non‑concessional contributions for the financial year mentioned in paragraph 292‑80(3)(a). (4) For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out: The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 21 days after the date of the release authority. (1) A superannuation provider that has been given a transitional release authority in accordance with section 292‑80B must pay to the person within 30 days after receiving the release authority the least of the following amounts: (a) if the person requests the provider in writing to pay a specified amount in relation to the release authority—that amount; (c) the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person in complying superannuation plans. > Note 1: Section 288‑95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection. > Note 2: Section 288‑100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority. > Note 3: For reporting obligations on the superannuation provider in these circumstances, see section 390‑65 in Schedule 1 to the Taxation Administration Act 1953. (2) The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person in complying superannuation plans. (3) Section 307‑125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section. (a) your non‑concessional contributions cap for the 2015‑2016 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsection 292‑85(7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 applies after the commencement of this section as if: (d) subsection 292‑85(6) of that Act as so amended had been applied (taking into account paragraph (c) of this subsection) for the purposes of working out your non‑concessional contributions cap for the 2016‑2017 financial year. (2) For the purposes of working out your non‑concessional contributions caps for the 2017‑2018 financial year and the 2018‑2019 financial year, if: (a) your non‑concessional contributions cap for the 2016‑2017 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsections 292‑85(6) and (7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 apply after the commencement of this section as if the amount worked out under subsection 292‑85(5) of that Act as so amended were $380,000. (3) To avoid doubt, this section does not affect your non‑concessional contributions cap for any financial year that ended before 1 July 2017. The tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your non‑concessional contributions (see section 292‑90 of the Income Tax Assessment Act 1997) for the financial year. (2) Subject to section 294‑55, the amendments of Division 294 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Treasury Laws Amendment (2017 Measures No. 2) Act 2017 apply on and after 1 July 2017. Despite sections 294‑30 and 294‑140 of the Income Tax Assessment Act 1997 (which are about when you have excess transfer balance), you do not have excess transfer balance in your transfer balance account on any day in the period of 6 months beginning on 1 July 2017 if: (a) the only transfer balance credits in the account in that period arose under item 1 of the table in subsection 294‑25(1) of that Act (which is about superannuation income streams you have just before 1 July 2017); and (b) the sum of those transfer balance credits exceeds your transfer balance cap, but is less than or equal to $1,700,000; and (c) at the end of the period, the sum of all the transfer balance debits arising in your transfer balance account equals or exceeds the amount of the excess from paragraph (b). (1) Despite subsection 294‑10(2), a transfer balance credit arises under item 4 of the table in subsection 294‑25(1) of the Income Tax Assessment Act 1997 only in relation to a borrowing that arises under a contract entered into on or after 1 July 2017. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2017 is treated as if it arose under a contract entered into before 1 July 2017 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) on 1 July 2017, a transfer balance debit arose in your transfer balance account under item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997; and (b) the sum of all the transfer balance credits that arise in your transfer balance account under item 1 of the table in subsection 294‑25(1) of that Act exceeds the amount that would, apart from this section, be the amount of that debit. (2) Despite column 2 of item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997, the amount of the transfer balance debit is instead equal to the sum worked out under paragraph (1)(b) of this section. 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain > The object of this Subdivision is to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the following legislative changes: (a) the introduction of a transfer balance cap (as a result of Schedule 1 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016); (b) the exclusion of transition to retirement income streams (and similar income streams) from being superannuation income streams in the retirement phase (as a result of Schedule 8 to that Act). (a) starting on the start of the day on which the Bill that became the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 was introduced into the House of Representatives; and (a) at the start of the pre‑commencement period, a CGT asset of a fund is a segregated current pension asset of the fund; and (i) at a time (the cessation time) in the pre‑commencement period, the asset ceases to be a segregated current pension asset of the fund; or (ii) at the start of 1 July 2017 (also the cessation time), the asset ceases to be a segregated current pension asset of the fund because it supports a superannuation income stream covered by subsection 307‑80(3) of the Income Tax Assessment Act 1997; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (b) the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year is greater than nil; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and #### 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑115(3)(a), the fund makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the fund’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Subsection 295‑390(1) of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). > 2016‑17 non‑exempt proportion means 1 minus the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year. #### 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset (i) the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997 in respect of the trust for the 2016‑17 income year; (ii) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year; and (d) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and #### 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑125(3)(a), the trust makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the trust’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Section 295‑400 of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). (a) unless paragraph (b) applies—1 minus the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997; or (b) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage worked out by subtracting the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year from 100%. This Subdivision applies to an entity that is the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust. For the purposes of this Subdivision, an asset is a 30 June 1988 asset of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust if the entity owned it at the end of 30 June 1988. > Note: Section 295‑90 of the Income Tax Assessment Act 1997 treats these assets as having been acquired on 30 June 1988. (1) The first element of the cost base of each 30 June 1988 asset of the entity’s is the greater of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). (2) The first element of the reduced cost base of each 30 June 1988 asset of the entity’s is the lesser of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). the market value of the asset as at the end of 30 June 1988 is the average of the highest and lowest trade prices for identical assets recorded on 30 June 1988 in whichever of the following markets is applicable: (d) if, on that date, there was a State capital city market (other than the Sydney market) that recorded a higher volume of trading than the Sydney market in identical assets—that State capital city market; (2) For the purposes of this section, an asset is taken to have been listed on an Australian stock exchange on 30 June 1988 if, and only if, on that day the asset had the status of having been granted official quotation by a securities exchange within the meaning of the former Securities Industry Act 1980 or the law of a State or Territory corresponding to that former Act. (b) at any time during the period commencing at the time when the shares were acquired and ending at the end of 30 June 1988, the company paid an amount that was not a dividend to the entity in respect of the shares; (b) at any time during the period commencing at the time when the interest or unit was acquired and ending at the end of 30 June 1988, the trustee of the trust paid an amount to the entity in respect of the interest or unit, being: (i) in a case where the entity was exempt from tax for the year of income in which the payment was made—an amount that, if the entity had not been exempt from tax, would not have been the entity’s assessable income; or the cost base to the entity of the interest or unit as at 30 June 1988 is reduced by so much of the amount as is not attributable to a deduction allowed under former Division 10C or 10D of the Income Tax Assessment Act 1936. (1) Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (2) and (3) of this section apply if an entity exercises rights or options as mentioned in that section to acquire: (b) the greater of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (b) the lesser of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (4) The payment referred to in subsection (2) or (3) can include giving property. To the extent that the payment does, use the market value of the property in working out the amount of the payment. (1) A notice given under subsection 82AAT(1A) or (1CB) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑170 of the Income Tax Assessment Act 1997. (2) A notice given under subsection 82AAT(1C) or (1CD) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑180 of the Income Tax Assessment Act 1997. (1) A proportion of the ordinary income and statutory income of a continuously complying fixed interest ADF of an income year that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).  > Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the income year. > Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the income year. (4) A choice for the purposes of the definition of reckoning time in subsection (5) must be made on or before the date of lodgment of the income tax return of the ADF for the income year to which the choice relates, or before a later day allowed by the Commissioner. > continuously complying fixed interest ADF, in relation to an income year (the current year), means a fund that is a fixed interest complying ADF in relation to each of the following years: > current 25 May balance, in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time: (b) subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 September 1989 is to be added to the balance; (b) a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that day, made a deposit with the ADF that consisted wholly or partly of the roll‑over (as defined in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 as in force on that day) of an eligible termination payment as so defined, being an eligible termination payment that included a concessional component (as so defined). > fixed interest complying ADF, in relation to a year of income, means a complying ADF where both of the following conditions are satisfied: (a) not less than 90% of the amount that, apart from this section, would be the assessable income of the ADF of the income year (other than non‑arm’s length income or amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997) consists of any one or more of the following: (ii) any profit arising on the disposal, redemption, cancellation or maturity of a CGT asset referred to in paragraph 295‑85(3)(b) of the Income Tax Assessment Act 1997; (iii) an amount included in assessable income under Division 16E of Part III of the Income Tax Assessment Act 1936 (or would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply); (ii) virtual PST life insurance policies (as defined in the Income Tax Assessment Act 1997) issued by a life insurance company. > original 25 May balance, in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988. > reckoning time, in relation to an ADF in relation to an income year, means the beginning of the income year, or such other time during the income year as the ADF chooses in accordance with subsection (4). (6) This section does not apply to an ADF in relation to an income year unless the whole of the benefit that would accrue to the ADF from the application of this section in relation to the income year has been, or can reasonably expected to be, passed on to eligible depositors. An election made by the trustee of a complying superannuation fund under subsection 279(4) of the Income Tax Assessment Act 1936 that had effect for the income year of the fund in which 30 June 2007 occurs continues to have effect as if it had been made under section 295‑465 of the Income Tax Assessment Act 1997. Subdivisions 295‑I (no‑TFN contributions) and 295‑J (Tax offset for no‑TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006‑2007 income year ends on a day (the end day) after 1 July 2007 as if: (b) the entity’s no‑TFN contributions income for the entity’s 2007‑2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007‑2008 income year if the contributions concerned had been made in the entity’s 2007‑2008 income year. (2) Division 301 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section because you are a member of the fund in the same way as it would apply if the payments were superannuation member benefits paid to you from a complying superannuation fund. For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. Subdivision 301‑F of the Income Tax Assessment Act 1997 applies in relation to income years starting on or after 1 July 2007. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to the following in respect of an income year that starts on or before 1 July 2021: (b) the amendments of the Income Tax Assessment (1997 Act) Regulations 2021 made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023. (a) a superannuation benefit (the trigger benefit) was paid to a person in the 2020‑21 income year or an earlier income year; and (c) the trigger benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; and (2) The Commissioner cannot amend an assessment on the basis that a superannuation benefit paid to the person is a superannuation income stream benefit because of the amendments made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 if: (iii) the superannuation benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (a) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (b) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. (1) The Minister may, by legislative instrument, make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions) that: (a) relate to the amendments or repeals made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023; and (2) Without limiting subsection (1), rules made under this section before the end of the period of 12 months starting on the day that Schedule commences may provide that provisions of that Schedule, or any other Act or instrument, have effect with any modifications prescribed by the rules. Those provisions then have effect as if they were so modified. (2) Division 302 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section after another person’s death, because the other person was a member of that fund, in the same way as it would apply if the payments were superannuation death benefits paid to you from a complying superannuation fund. For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if: (b) just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. (2) For the purposes of Subdivision 82‑B of Division 82, Division 302 and section 303‑5 of the Income Tax Assessment Act 1997, the definition of death benefits dependant in section 302‑195 of that Act applies as if paragraphs (a) and (b) of the definition were replaced with the following paragraphs: (a) a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008 or a person who was formerly such a spouse; or (b) a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008, who is aged less than 18. (ii) a superannuation guarantee payment, a small superannuation account payment, an unclaimed money payment, a superannuation co‑contribution benefit payment or a superannuation annuity payment. (2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you at a time in the period: (i) a condition of release specified in item 107A or 207AA of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; or (ii) a condition of release specified in item 109AA of the table in Schedule 2 to the Retirement Savings Accounts Regulations 1997. (1) This section applies to a superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with section 292‑80B. (2) The superannuation benefit is not assessable income and is not exempt income to the extent that it does not exceed the amount mentioned in subsection (3). (3) The amount is the amount of excess non‑concessional contributions stated in the release authority in accordance with paragraph 292‑80A(3)(a), reduced (but not below zero) by the amount of any superannuation benefit that was not assessable income and not exempt income under a previous operation of subsection (2) in relation to the release authority. (4) The superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3). (a) you have an interest in a FIF (within the meaning of Part XI of the Income Tax Assessment Act 1936, as in force just before the commencement of item 37 of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010) (the paying fund); and (b) Subdivision 305‑B of the Income Tax Assessment Act 1997 applies in relation to the paying fund (see section 305‑55 of that Act); and (c) the paying fund transfers an amount to a complying superannuation fund in respect of you during the deduction year; and (d) you choose under section 305‑80 of the Income Tax Assessment Act 1997 that the amount, or part of the amount, is to be treated as assessable income of the complying superannuation fund; and (e) immediately before the transfer happens, there is a post‑FIF abolition surplus (within the meaning of the Income Tax Assessment Act 1936) for the paying fund in relation to you; and For the purposes of the definition of specified roll‑over amount in the Income Tax Assessment Act 1997, treat the taxable component of a directed termination payment (within the meaning of section 82‑10F) as the element untaxed in the fund of a superannuation benefit that is a roll‑over superannuation benefit. (1) This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007. > Note: This section also applies to an income stream replacing an earlier one because of an involuntary roll‑over (see section 307‑127). (2) Despite subsection 307‑125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows: (a) first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007); (b) next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits. The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit. (3) Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened: (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day; (ba) the holder of the superannuation interest is aged 60 or above on 1 July 2007, if none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day. (a) treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and (b) work out the tax free component of the superannuation interest for the purposes of section 307‑125 of the Income Tax Assessment Act 1997 under subsections (6) and (6A). (i) an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and (ii) the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time; (b) next, work out the unused undeducted purchase price (within the meaning of paragraph (a) of the definition of that term in subsection 27A(1) of the Income Tax Assessment Act 1936 just before the commencement of this section, and disregarding paragraphs (b) and (c) of that definition) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007; (c) next, work out the pre‑July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this section) of the eligible termination payment. (a) at least one superannuation income stream benefit was paid from the superannuation income stream before 1 July 1994; or (b) section 27AAAA of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007) applied to the superannuation income stream just before 1 July 2007; (7) For the purposes of paragraph (6)(c), disregard the value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment. (8) If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as: (b) if 1 or more other events mentioned in subsection (3) happened before the commutation—the time just before the earliest of those events happens. (a) references in that section to the later income stream (in relation to a time, or event happening, before the payment of that involuntary roll‑over superannuation benefit) include references to the earlier income stream; and (b) references in that section to the superannuation interest supporting the later income stream (in relation to a time, or event happening, before the payment of that benefit) include references to the earlier interest. (1) This section applies for the purposes of working out the amount of your total superannuation balance just before 1 July 2017. (2) The transfer balance mentioned in paragraph 307‑230(1)(b) of the Income Tax Assessment Act 1997 just before 1 July 2017 is taken to be equal to: (a) the sum of the transfer balance credits (if any) in your transfer balance account just after the start of 1 July 2017; less (b) the sum of the transfer balance debits (if any) arising in your transfer balance account on 1 July 2017 under item 4 of the table in subsection 294‑80(1) of that Act (about payment splits). (1) Section 307‑231 of the Income Tax Assessment Act 1997 applies in relation to borrowings that arise under contracts entered into on or after 1 July 2018. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2018 is treated as if it arose under a contract entered into before 1 July 2018 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) treat a deduction made under former section 279 of the Income Tax Assessment Act 1936 as having been made under section 295‑465 of the Income Tax Assessment Act 1997 instead; and (b) treat a deduction made under former section 279B of the Income Tax Assessment Act 1936 as having been made under section 295‑470 of the Income Tax Assessment Act 1997 instead. If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007‑2008 income year is, despite subsection 307‑345(1), the total of: (b) the amount by which $140,000 exceeds the upper limit for the 2006‑2007 income year (worked out under section 159SG of that Act). Division 316 of the Income Tax Assessment Act 1997 applies in relation to demutualisations occurring on or after 1 July 2008. If: (a) any assets held by the benefit funds of a life insurance company that is a friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a complying superannuation fund; and (b) the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer; the transfer is disregarded for any purposes of the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936. (1) In working out the amount that a life insurance company can deduct, in respect of life insurance policies that are disability policies (other than continuous disability policies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income. (2) In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection (1) applies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company’s liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320‑85(4) of that Act. If: (2) If the life insurance company wishes to include a part of an approved asset in its virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑87(2) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society establishes a virtual PST in the 2000‑01 income year, the calculation of the transfer values of the company’s virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year. (1) Subsection (3) applies for the purposes of subparagraph (b)(i) of the definition of virtual PST life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 259 of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007. (2) Subsection (3) also applies for the purposes of subparagraph (b)(i) of the definition of complying superannuation/FHSA life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 47 of Schedule 7 to the First Home Saver Accounts (Consequential Amendments) Act 2008. (3) Treat an annuity as having been purchased out of a superannuation lump sum or an employment termination payment, if the annuity was purchased: (b) out of an eligible termination payment (within the meaning of the Income Tax Assessment Act 1997, as in force just before the commencement mentioned in subsection (1) of this section). (2) If the life insurance company wishes to include a part of an approved asset in its segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (a) a life insurance company had a liability before 1 July 2000 under a life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and (c) there is a transfer of the company’s assets to the segregated exempt assets to meet that liability or that part of the liability; (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑105(1) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320‑225 of the Income Tax Assessment Act 1997 in the 2000‑01 income year, the calculation of the transfer values of the company’s segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year. Section 322‑25 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Part VC of the Insurance Act 1973 after 17 October 2008. 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you > new Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force after the commencement of this section. > old Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. > STS taxpayer means an STS taxpayer within the meaning of Division 328 of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. #### 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years (1) This section applies for the purpose of working out whether you are a small business entity (other than because of subsection 328‑110(4) of the Income Tax Assessment Act 1997) for the 2007‑08 or 2008‑09 income year. (2) You work out your aggregated turnover for the 2005‑06 or 2006‑07 income year as if the amendments made by Schedule 1 to the Tax Laws Amendment (Small Business) Act 2007 had been in force in relation to that year. (a) your aggregated turnover for the 2005‑06 income year (worked out in accordance with subsection (2)) is $2 million or more; but (b) your STS group turnover for that year (worked out under Subdivision 328‑F of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section) is less than $2 million. (2) The following provisions apply as if you are a small business entity for the income year in which you are winding up the business: #### 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you (1) For the purpose of working out whether you are a small business entity for the 2007‑08, 2008‑09, 2009‑10 or 2010‑11 income year (each a relevant income year) for the purposes of a provision to which subsection (3) applies: (2) An entity (the first entity) controls a discretionary trust for a relevant income year if, for any of the 4 income years (a previous income year) before that year: (a) if the previous income year is before the 2007‑08 income year—the trustee of the trust made a distribution of $100,000 or more to the first entity, any of its affiliates, or the first entity and any of its affiliates; or (i) the trustee of the trust paid to, or applied for the benefit of, the first entity, any of the first entity’s affiliates, or the first entity and any of its affiliates, any of the income or capital of the trust; and (ii) the percentage (the control percentage) of the income or capital paid or applied is at least 40% of the total amount of income or capital paid or applied by the trustee for that year. (1) This section sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (2) This section also sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (3) Any ordinary income that, apart from paragraph 328‑105(1)(a) of the Income Tax Assessment Act 1997 (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have derived before the changeover year (while you were using the STS accounting method) and you have not included in your assessable income because you have not received it is included in your assessable income for the changeover year. (4) Any general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, that, apart from paragraph 328‑105(1)(b) of that Act (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have incurred before the changeover year (while you were using the STS accounting method) and that you have not deducted because you have not paid them can be deducted for the changeover year. (b) for any later income year for which you are a small business entity but only if you used the STS accounting method for the income year before that later year. > Note: Example: You are a small business entity for the 2007‑08 and 2008‑09 income years and you continue to use the STS accounting method for those years. You are not a small business entity for the 2009‑10 income year so you cannot continue to use the STS accounting method for that year. Because you cannot use the STS accounting method for the 2009‑10 income year, you will not be able to use it again for a later income year even if you are a small business entity for that later year. In sections 328‑115 and 328‑120, STS accounting method means the accounting method that was required by the Income Tax Assessment Act 1997 to be used by STS taxpayers for the 2004‑05 income year. (b) you made a choice under subsection 328‑175(3) of old Subdivision 328‑D in relation to a depreciating asset you use to carry on a primary production business and for which you could deduct amounts under Subdivision 40‑F or 40‑G of the Income Tax Assessment Act 1997. (2) In determining whether you can choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997 in an increased access year, disregard subsection 328‑175(10) of that Act. (3) In applying paragraph 328‑175(10)(b) of that Act for the purpose of determining whether you can choose to use that Subdivision in any income year after the increased access years, disregard: (4) Paragraph 328‑180(1)(b) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that paragraph to $1,000: (i) first used the asset, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (i) first used the asset, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (i) first used the asset, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, on or after 1 July 2023 and on or before 30 June 2026. (a) a reference in that paragraph to the end of the income year in which you start to use the asset, or have it installed ready for use, for a taxable purpose were a reference to the earlier of: if: (i) first used the asset, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021. (5) Paragraph 328‑180(2)(a) or (3)(a) of the Income Tax Assessment Act 1997 applies to an amount included in the second element of the cost of an asset as if a reference in that paragraph to $1,000: (5A) For the purposes of determining whether, under subsection 328‑180(2) of the Income Tax Assessment Act 1997, you can deduct, for an income year (the current year), the taxable purpose proportion of an amount included in the second element of the cost of an asset, disregard paragraph (b) of that subsection if: (2) For the purposes of determining whether subsection 328‑180(1) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (b) of that subsection (which sets a limit of $1,000 on the cost of the asset) if, in the period beginning at the 2020 budget time and ending on 30 June 2023, you: (3) For the purposes of determining whether subsection 328‑180(2) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (a) of that subsection (which sets a limit of $1,000 on the amount) if the amount is included in the second element of the cost of the asset at any time in the period beginning at the 2020 budget time and ending on 30 June 2023. (4) In applying paragraph 328‑180(3)(a) of the Income Tax Assessment Act 1997 to an asset, disregard an amount included in the second element of the cost of the asset if the amount is deducted under subsection 328‑180(2) of that Act, as modified by subsection (3) of this section. (5) Section 328‑210 of the Income Tax Assessment Act 1997 applies as if the words “less than $1,000 but” in subsection (1) were disregarded, in relation to a deduction for an income year that ends: Subsection 328‑190(2) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that subsection to 15% were a reference to 57.5% if you are covered by section 40‑125 for the asset (which is about backing business investment). (1) A depreciating asset of yours that had been allocated to your general STS pool is treated as being allocated to your general small business pool. (2) A depreciating asset of yours that had been allocated to your long life STS pool is treated as being allocated to your long life small business pool. (3) If you made a choice, under subsection 328‑185(5) of old Subdivision 328‑D, not to have a depreciating asset allocated to your long life STS pool, the choice has effect for the purposes of subsection 328‑185(5) of new Subdivision 328‑D. (1) This section applies if a depreciating asset of yours is treated as being allocated to your general small business pool or long life small business pool under section 328‑185. (2) The opening pool balance of your general small business pool or long life small business pool for the 2007‑08 income year is taken to be the closing pool balance of your general STS pool or long life STS pool, as the case requires, for the 2006‑07 income year, reduced or increased by any adjustment required under section 328‑225 of new Subdivision 328‑D (about change in the business use of an asset). (a) you were not an STS taxpayer for the 2006‑07 income year (because you stopped being an STS taxpayer before that time); but (b) you are a small business entity for the 2007‑08 income year or a later income year and you choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets for that income year; the opening pool balance of your general small business pool or long life small business pool includes the sum of the taxable purpose proportions of the adjustable values of depreciating assets allocated to the pool under subsection 328‑185(3) of new Subdivision 328‑D for that year. (1) This section applies for the purposes of applying Subdivision 328‑D of the Income Tax Assessment Act 1997 for the 2012‑13 income year and later income years. (2) A depreciating asset that had been allocated to your long life small business pool is treated as being allocated to your general small business pool. (a) the closing pool balance of your general small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under section 328‑225 of that Act; and (b) the closing pool balance of your long life small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under that section. (1) This section applies if you chose to stop being an STS taxpayer for the 2005‑06 income year or the 2006‑07 income year. (2) You cannot choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets until at least 5 years after the income year for which you chose to stop being an STS taxpayer. > Note: Subdivision 328‑D of the Income Tax Assessment Act 1997 continues to apply to depreciating assets that have been allocated to your small business pools even if you are not a small business entity, or do not choose to use that Subdivision, for an income year: see section 328‑220 of that Subdivision. (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct 20% of particular expenditure for your 2023‑24 income year if: (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (d) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑450 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (6) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (ii) if the provider is a registered body of a kind listed in paragraph (2)(b), (c) or (d)—the training is within the provider’s scope of registration for that kind of registered body; and (d) each enrolment, or arrangement, for the provision of the training is made or entered into at or after 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022; and > Note: Paragraphs (b) and (c) mean this section will not apply to expenditure for on‑the‑job training or training provided by you in house. (a) a registered higher education provider (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); (b) a NVR registered training organisation (within the meaning of the National Vocational Education and Training Regulator Act 2011); (c) a registered education and training organisation (within the meaning of the Education and Training Reform Act 2006 (Vic.)); (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct for your 2023‑24 income year an amount that is equal to the sum of: (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (3) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑460 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (4) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (b) you incur the expenditure in the period starting at 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022 and ending at the end of: (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (4) For the purposes of paragraphs (1)(c) and (2)(c), in working out whether you can deduct an amount of expenditure on a depreciating asset, assume that: (b) throughout that effective life, you will use the asset for a taxable purpose to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose. (a) 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑470(1) or (3) applies in relation to the income year; and > Note: The deduction relates to the period of 1 July 2023 to 30 June 2024. An entity may have deducted an amount under paragraph (a) for a previous income year if the entity has a substituted accounting period. (2) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑470 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (3) Sections 8‑10, 40‑215 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (c) you start to use the asset, or have it installed ready for use, for any purpose after 30 June 2023 but before 1 July 2024; and (d) you start to use the asset, or have it installed ready for use, for a taxable purpose at a time (the start time) that is: (e) you are a small business entity, or an entity covered by subsection (4), for the income year that includes the start time; and (h) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) a new reasonably comparable depreciating asset that uses a fossil fuel (other than a use of which that is merely incidental) is available in the market at the start time; (ii) if the asset is being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than the other asset; (iii) if the asset is not being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than a new reasonably comparable depreciating asset that is available in the market at the start time; or (i) a depreciating asset (other than an asset excluded under subsection (6)) that uses electricity, or energy that is generated from a renewable source, to be more energy efficient; (iv) the use of electricity, or energy that is generated from a renewable source, by another depreciating asset to be monitored. (a) the amount is included in the second element of a depreciating asset’s cost under paragraph 40‑190(2)(a) of the Income Tax Assessment Act 1997; and (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (d) you are a small business entity, or an entity covered by subsection (4), for the income year in which the expenditure is incurred; and (i) if the asset could use a fossil fuel (other than a use of which that is merely incidental)—the asset to only use electricity, or energy that is generated from a renewable source; (ii) if the asset uses electricity, or energy that is generated from a renewable source—the asset to be more energy efficient; (g) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) For the purposes of paragraph (1)(b) or (3)(b), in working out whether you can deduct an amount of expenditure assume that: (i) for the purposes of paragraph (1)(b)—to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose; or (ii) for the purposes of paragraph (3)(b)—to the same extent as you use it for a taxable purpose in the income year in which the expenditure is incurred. (b) expenditure (other than expenditure referred to in subparagraph (3)(e)(i)) on an asset that can use a fossil fuel (other than a use of which that is merely incidental); (c) an asset that solely or predominantly generates electricity from a renewable source (for example, photovoltaic cells) or expenditure on such an asset; (d) an asset, or expenditure, being capital works for which you can deduct an amount under Division 43 of the Income Tax Assessment Act 1997; > Note: Subsections (1) and (3) also do not apply to an item of trading stock because such an asset is not a depreciating asset: see section 40‑30 of the Income Tax Assessment Act 1997. A reference in each of the following provisions of the Income Tax Assessment Act 1997 to a registration under section 27A of the Industry Research and Development Act 1986 includes a reference to a registration under former section 39J of that Act: (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) the R&D entity cannot deduct an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from: (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D entity could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:22pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the R&D entity is taken to be able to deduct under subsection 355‑315(2) of the new Act that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the R&D entity’s assessable income for the event year under subsection 355‑315(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 for the asset, the R&D entity is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑446 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the R&D entity is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑465 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: Section 355‑315 of the new Act would otherwise apply for the event in a case where the R&D entity had new law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by an R&D partnership; and (i) the partner can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the partner chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D partnership could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the partner is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:21.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D entity</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D partnership</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the partner is taken to be able to deduct under subsection 355‑525(2) of the new Act the partner’s proportion of that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the partner’s assessable income for the event year under subsection 355‑525(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partner’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if one or more partners (including the partner) in the R&D partnership is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset, the partner is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑448 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the partner is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑467 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s deductions under section 355‑520 of the new Act mentioned in subsection (4A) of this section. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the partner for the event, do so apply to the partner for the event. > Note 1: Section 355‑525 of the new Act would otherwise apply for the event in a case where the partner had new law deductions. Item 7 of the table in subsection 57‑110(2) in Schedule 2D to the Income Tax Assessment Act 1936 applies as if the deduction rules set out in the final column of that item also included former sections 73BA and 73BH of the Income Tax Assessment Act 1936. For the purposes of step 1 of the method statement in subsection 355‑415(2) of the Income Tax Assessment Act 1997, also disregard amounts that have already been taken into account under former subsection 73B(14AA) of the Income Tax Assessment Act 1936 for the R&D entity, the grouped entity and the R&D activities for an earlier income year. (1) This section applies if, apart from former paragraph 73B(10)(a) of the Income Tax Assessment Act 1936, an eligible company could deduct advance R and D expenditure in one or more income years commencing on or after 1 July 2011. > Note: That deduction would be under former section 73B of that Act as that former section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (a) apart from Subdivision H (prepaid expenditure) of Division 3 of Part III of the Income Tax Assessment Act 1936, an eligible company can deduct an amount under former section 73B, 73BA, 73BH, 73QA, 73QB or 73Y of that Act for an income year commencing before 1 July 2011; and (c) apart from former paragraph 73B(10)(a) of that Act, the eligible company could deduct an amount, as a result of that application of that Subdivision, for an income year commencing on or after 1 July 2011. > Note: That deduction would be under that Act as it applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (3) Former paragraph 73B(10)(a) of that Act is taken to apply to those income years commencing on or after 1 July 2011 as if the reference in that former paragraph to section 39J of the Industry Research and Development Act 1986 were a reference to section 27A of that Act. (4) An expression used in this section that is also used in former section 73B of the Income Tax Assessment Act 1936 has the same meaning in this section as it has in that former section. This Subdivision applies to core technology (within the meaning of former section 73B of the Income Tax Assessment Act 1936) if: (a) you incurred core technology expenditure (within the meaning of that former section) in an income year commencing before 1 July 2011 in relation to the core technology under one or more contracts entered into at or after the time referred to in former subsection 73B(12) of that Act; and (b) that expenditure (the undeducted expenditure) cannot be deducted for the last income year commencing before 1 July 2011. (1) This section applies for the purposes of Division 40 of the Income Tax Assessment Act 1997, other than sections 40‑292 and 40‑293 of that Act, if the core technology (the asset) is a depreciating asset. (2) Disregard this section, including its effect on the amount you can deduct under section 40‑25 of that Act for the asset, for the purposes of working out: (3) The asset’s opening adjustable value for the first income year that commences on or after 1 July 2011 (the first new income year) is equal to the amount of the undeducted expenditure. (4) Subsection 40‑75(2) of the Income Tax Assessment Act 1997 applies to the asset as if the first new income year were a change year (within the meaning of that subsection). If the core technology is not a depreciating asset, you can deduct the undeducted expenditure in equal proportions over a period of 5 income years starting in the first income year commencing on or after 1 July 2011. To work out the film component (if any) of your tax loss for the 1997‑98 income year or a later income year, apply former section 375‑805 of the Income Tax Assessment Act 1997. If you incurred a film loss for the purposes of former section 79F (Film losses of 1989‑90 to 1996‑97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989‑90 to 1996‑97 income years, that film loss is the film component of your tax loss for that income year. (1) To work out your film loss (if any) for the purposes of the Income Tax Assessment Act 1997 for the 1989‑90 or a later income year, apply former section 375‑810 of that Act. (2) You can deduct in the 1997‑98 or a later income year your film loss for any of the 1989‑90 to 1996‑97 income years only to the extent that it has not already been deducted. (1) Division 392 of the Income Tax Assessment Act 1997 applies to assessments for the 1998‑99 income year and later income years. (a) it had applied to your assessment for each income year before the 1998‑99 income year for which Division 16 of Part III of the Income Tax Assessment Act 1936 applied in relation to your income; and (b) you had carried on a primary production business during each income year before the 1998‑99 income year when you carried on a business of primary production; and (c) for each income year before the 1998‑99 income year you had a basic taxable income equal to your taxable income for the income year for the purposes of Division 16 of Part III of the Income Tax Assessment Act 1936. > Note: Section 149A of the Income Tax Assessment Act 1936 identifies what your taxable income for an income year is for the purposes of Division 16 of Part III of that Act. Division 392 of the Income Tax Assessment Act 1997 does not apply to your assessment for the 1998‑99 income year or a later income year if you made an election under section 158A (Election that Division not apply) of the Income Tax Assessment Act 1936 relating to an income year before the 1998‑99 income year. 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 A reference in Division 393 of the Income Tax Assessment Act 1997 to a deduction under section 393‑5 of that Act for making a farm management deposit is taken to include a reference to a deduction under section 393‑10 in Schedule 2G to the Income Tax Assessment Act 1936, as in force just before the commencement of this section, if the deposit was made before the 2010‑11 income year. #### 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 (b) the deposit was made with an FMD provider as a result of a request to which section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, applied; the unrecouped FMD deduction in respect of the deposit at that time is equal to the amount of the unrecouped deduction (within the meaning of the former subsection 159GA(3) of the Income Tax Assessment Act 1936) in respect of the deposit immediately before it ceased to be a deposit under the Loan (Income Equalization Deposits) Act 1976. > Note: This means that the unrecouped deduction relating to the deposit under the Loan (Income Equalization Deposits) Act 1976 continues to apply (by becoming an unrecouped FMD deduction) when the deposit is transferred to an FMD provider as a farm management deposit. The Loan (Income Equalization Deposits) Act 1976 was repealed on 22 February 2005. If a beneficiary of a trust was covered by paragraph (c) of the definition of primary producer in section 393‑25 in Schedule 2G to the Income Tax Assessment Act 1936 in the 2009‑10 income year, treat subsection 393‑25(3) of the Income Tax Assessment Act 1997 as having applied to the beneficiary for the purpose of determining the maximum number of choices that the trustee may make under subsection 393‑27(2) of that Act for the 2010‑11 income year. (a) a farm management deposit of an owner was unclaimed moneys for the purposes of section 69 of the Banking Act 1959; and (2) For the purpose of subsection 393‑10(1) of the Income Tax Assessment Act, treat the repaid unclaimed moneys as a repayment of the deposit of the owner. (3) To avoid doubt, the payment of unclaimed moneys to the Commonwealth under section 69 of the Banking Act 1959 is not a repayment of the deposit of the owner for the purposes of Division 393 of the Income Tax Assessment Act 1997. 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 #### 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 If a farm management deposit was made with an FMD provider as a result of a request under section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, then: (a) subsections 393‑40(1) to (4) of the Income Tax Assessment Act 1997 apply as if the day the deposit was made was the day on which the deposit was originally made under the Loan (Income Equalization Deposits) Act 1976; and (1) A copyright collecting society to which section 51‑43 of the Income Tax Assessment Act 1997 applies, may elect that, from 1 July 2004, the section apply to all ordinary income, and statutory income, collected or derived by the society on or after 1 July 2004. Division 420 of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division. Subdivision 615‑C of the Income Tax Assessment Act 1997 applies to you with the modifications set out in this Subdivision if you chose to obtain a roll‑over involving \*shares or units that: (b) were your trading stock, or revenue assets, at the time immediately before that disposal, redemption or cancellation. (1) Disregard subparagraph 615‑45(a)(ii), and paragraph 615‑45(b), of the Income Tax Assessment Act 1997 if the roll‑over relates to \*shares that were disposed of, redeemed or cancelled. (2) For each of the \*shares in the interposed company that you acquired in return for those of your shares or units in the original entity that were your \*trading stock at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  (2) For the purpose of calculating any profit or loss on a future disposal, cessation of ownership, or other realisation of a \*share in the interposed company that you acquired in return for those of your shares or units in the original entity that were \*revenue assets at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  Subdivision 620‑A of the Income Tax Assessment Act 1997 applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. (1) Part 3‑90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Act (No. 1) 2002 and amended by: (2) Section 713‑50 of the Income Tax Assessment Act 1997 (about factors to consider in determining destination of distribution by non‑fixed trust) applies for the purposes of this Part in the same way as it applies for the purposes of Part 3‑90 of that Act. ### Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly‑owned subsidiary of the entity (the future head company) that became the head company of the group; or (ii) at some time during that period, the entity was a wholly‑owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (ii) it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (1) If a group is a transitional group, its head company may, subject to subsection (3), choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (3) If the choice is to be made after the end of the period mentioned in paragraph (2)(a) and before the end of the day mentioned in paragraph (2)(b), it cannot be made unless each entity in relation to which the conditions in subsection (5) are satisfied has agreed to it being made. (a) the entity (the leaving entity) ceased to be a subsidiary member of the group before the choice was made (in a subsection (3) case) or before the revocation took place (in a subsection (4) case); and (b) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; and (c) the asset had become that of the head company because that section applied when a chosen transitional entity (whether or not the same entity as the leaving entity) became a subsidiary member. Section 716‑855 applies for the purposes of this Division in the same way as that section applies for the purposes of Part 3‑90 of the Income Tax Assessment Act 1997. is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705‑B of that Act and with this Division. 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity Section 701‑10 (cost to head company of assets of joining entity) and subsection 701‑35(4) (setting value of trading stock at tax‑neutral amount) of the Income Tax Assessment Act 1997 do not apply to the assets of a chosen transitional entity. > Note: The fact that the head company inherits the entity’s history under section 701‑5 of that Act when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time. #### 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities (2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non‑chosen subsidiary) is worked out in a special way. (b) for each sub‑group (see subsection (6)) that exists in relation to the non‑chosen subsidiary—the sub‑group’s notional allocable cost amount (see subsection(5)) for the non‑chosen subsidiary. (4) The head company adjusted allocable amount for the non‑chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if; (b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of head company’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub‑group in relation to the non‑chosen subsidiary. (5) For each sub‑group that exists in relation to the non‑chosen subsidiary, there is a sub‑group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non‑chosen subsidiary if: (a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non‑chosen subsidiary and the entities comprising the sub‑group; and (c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub‑group membership interests (see subsection (6)) in relation to the sub‑group, and any such entity held those membership interests during the period when it actually held them; and (d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of chosen transitional entity’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub‑group. (6) If a chosen transitional entity holds membership interests in a non‑chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non‑chosen subsidiary: (a) the chosen transitional entity and each interposed non‑chosen subsidiary comprise a sub‑group in relation to the non‑chosen subsidiary (unless the non‑chosen subsidiary is included in a sub‑group in relation to another non‑chosen subsidiary); and (i) the membership interests that the chosen transitional entity holds directly in the non‑chosen subsidiary or in any of the interposed non‑chosen subsidiaries; (ii) the membership interests that each interposed non‑chosen subsidiary holds directly in the non‑chosen subsidiary or in any of the other interposed non‑chosen subsidiaries. #### 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities If any provision of the Income Tax Assessment Act 1997 would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply. > Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred. (1) This section has effect for the purposes of applying section 705‑70 (step 2 of allocable cost amount) of the Income Tax Assessment Act 1997 in relation to a transitional entity. (2) In spite of subsection 705‑70(1A) of that Act, if the amount of an accounting liability of the transitional entity would be different when it becomes an accounting liability of the transitional group, that difference is not taken into account in working out the amount of the liability. #### 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different (a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset (the roll‑over asset) for which there was: (ii) roll‑over relief under section 40‑340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and (i) became an asset of the head company when the transitional group came into existence because subsection 701‑1(1) (the single entity rule) of that Act applies; or differs at that time from what it would have been if the act, transaction or event that gave rise to the CGT event had not occurred in relation to the roll‑over asset; then the provisions mentioned in subsection (2) apply as if the act, transaction or event had not occurred in relation to the roll‑over asset. (a) the act, transaction or event mentioned in subsection (1) happened before a demerger and in connection with the demerger; and (b) before the transitional group came into existence, at least one of the following entities ceased to be a member of the demerger group because of the demerger: (i) the originating company in relation to the roll‑over, or the transferor in relation to the roll‑over relief, was a foreign resident; and (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as a transitional foreign‑held subsidiary of the group. #### 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets (1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied. (2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset. (a) the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and (b) former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset. (4) The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group. (6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses. #### 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets (b) just before the transitional group came into existence, the entity that became the head company held a pre‑CGT asset; and (d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre‑CGT asset and is held by the head company only because the entity is taken by subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company. (2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence. #### 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity (1) This section provides for an addition to the step 1 amount for working out under section 711‑20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity) that ceases to be a subsidiary member of the transitional group at a time (the leaving time), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701‑1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount for paragraph</span><span> </span><span>(2)(c)</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">If, because of the circumstances described in paragraphs</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(a) and (b):</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">The amount is:</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:180.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following provisions applied to the entity:</span></p><p class="Tablea"><span>(a) former section</span><span> </span><span>61A of the </span><span style="font-style:italic">Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(b) former Subdivision</span><span> </span><span>57</span><span>‑</span><span>I in Schedule</span><span> </span><span>2D to the</span><span style="font-style:italic"> Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(c) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(4) of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td><td style="width:148.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the amount treated as being the cost of the asset under that provision; and</span></p><p class="Tablea"><span>(b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>2</span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following subsections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span><span> applied to the entity:</span></p><p class="Tablea"><span>(a) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(5);</span></p><p class="Tablea"><span>(b) 58</span><span>‑</span><span>70(3)</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The amount treated as being the cost, or the first element of the cost, of the asset under that subsection</span></p></td></tr></tbody></table> ``` (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997, as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="4" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amounts and provisions for different dates of acquisition</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Date of the acquisition</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Amount</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Provision of Division</span><span style="font-weight:bold"> </span><span style="font-weight:bold">58 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> applying to the acquisition and the working out of the amount</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:76.7pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>160</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>220</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>After 30</span><span> </span><span>June 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>First element of the cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subsection</span><span> </span><span>58</span><span>‑</span><span>70(5)</span></p></td></tr></tbody></table> ``` > Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. > Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and ### Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: #### 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70‑45 to 70‑70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420‑51 to 420‑58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (a) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority‑owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority‑owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority‑owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority‑owned entity became a subsidiary member of the group, there was roll‑over relief under section 40‑340 of the Income Tax Assessment Act 1997. (a) while the asset is, because subsection 701‑1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, its tax cost setting amount is taken to be equal to the continuing majority‑owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711‑30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997. (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset becomes that of an entity (a new asset holder) other than the head company because subsection 701‑1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder) acquiring some or all of the membership interests in the new asset holder; and (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset is acquired by another entity (a new asset holder) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll‑over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value asset just before the acquisition; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 #### 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 (b) members of the consolidated group or the MEC group mentioned in subsection 104‑500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701‑1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701‑1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (3) If this section applies, neither subsection 104‑500(4) nor subsection 104‑500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year. ### Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C‑B); and (b) modifies certain rules in Part 3‑90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C‑C). > Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719‑2 and 719‑10 of this Act). 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership #### 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(ii) of that Act (see subsection 719‑2(3) of this Act). (b) a trust (a non‑resident trust) that does not meet the requirements in any item of the table in section 703‑25 of the Income Tax Assessment Act 1997. (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non‑resident company or a non‑resident trust; or Test entity must be a subsidiary member on assumption that non‑resident companies and non‑resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non‑resident company or non‑resident trust were a subsidiary member of the group. (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv). #### 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(iii) of that Act (see subsection 719‑2(3) of this Act). (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C‑10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3). If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C‑10 are met; and (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (ii) an entity that is a transitional foreign‑held indirect subsidiary of the group because of another application of this paragraph; Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign‑held indirect subsidiary would need to have satisfied the set of requirements in either section 701C‑10 or 701C‑15 (1) This Subdivision applies if an entity (the transitional foreign‑held joining entity) that is a transitional foreign‑held subsidiary or a transitional foreign‑held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time) the group comes into existence. (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign‑held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign‑held indirect subsidiary that becomes a subsidiary member at that time takes account of this. (a) section 701‑10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); apply, for the purposes of setting the tax cost of an asset of the transitional foreign‑held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign‑held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. > Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign‑held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign‑held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign‑held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign‑held subsidiary and the other entity. > Note 2: If the transitional foreign‑held joining entity is a transitional foreign‑held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705‑A of the Income Tax Assessment Act 1997, in its application in accordance with Subdivision 705‑B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company. Subsection 701‑35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax‑neutral amount) does not apply to the assets of the transitional foreign‑held joining entity if it is a transitional foreign‑held subsidiary. Section 701‑15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: (a) this section applies to each membership interest in the transitional foreign‑held subsidiary that is held by an entity (an eligible non‑resident) of a kind mentioned in subparagraph 701C‑20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign‑held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701‑1(2) of the Income Tax Assessment Act 1997 applies to the eligible non‑resident in the same way as it applies to the head company. Section 711‑5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: > Note: If the leaving entity is a transitional foreign‑held subsidiary (within the meaning of section 701C‑20 of the Income Tax (Transitional Provisions) Act 1997), this Division will, in accordance with subsection 701‑15(4) of this Act (see section 701C‑40 of the first‑mentioned Act), apply to membership interests that an eligible non‑resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity. (1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707‑C of the Income Tax Assessment Act 1997. (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period. (1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if: (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (d) the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997. (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: (1) The head company of a consolidated group may make a choice in the approved form to apply section 701D‑10 to another entity. (2) However, the head company cannot make that choice if subsection 701D‑10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (a) an asset of the head company because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701‑55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40‑77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40‑77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40‑285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount. (b) after the asset became an asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). > Note: The final entity will be different from the head company if an entity (the leaving entity) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40‑285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. > Note: The final entity will be entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701‑5 (the entry history rule) of that Act and perhaps also section 701‑40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity) became a subsidiary member of the group; and It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). > Note: In some cases, section 705‑47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40‑285(3) of this Act. If: (b) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and subsection 40‑285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701‑10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997. > Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997. (1) For the purposes of Part 3‑90 of the Income Tax Assessment Act 1997, this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960‑G of that Act whether the interest or right is a membership interest of the entity in the other entity. > Note: Under Subdivision 960‑G of the Income Tax Assessment Act 1997, a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001) apply to transactions in relation to the interest or right at the relevant time. Despite the amendments of section 703‑35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) If an entity (the joining entity) to which section 40‑75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time), this Subdivision applies in relation to: (ii) became assets of the head company of the group at the joining time because of section 701‑1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure. (1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). (2) If the joining entity could not deduct an amount under Subdivision 40‑B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701‑55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40‑35, 40‑37, 40‑40 or 40‑43 treated the joining entity as holding a notional asset. > Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705‑30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. (a) deductions under former Subdivision 330‑A, 330‑C or 330‑H of the Income Tax Assessment Act 1997, or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated an entity as holding because of the expenditure. (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); > Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40‑75(4) of this Act, but may have been reset since under Subdivision 40‑B of the Income Tax Assessment Act 1997. > Note 2: The effective life of a notional asset is specified by whichever one of sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act is relevant to the notional asset. (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (9) Section 705‑55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705‑45 of that Act. > Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705‑40 of the Income Tax Assessment Act 1997. (a) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701‑5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. > Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705‑305(3). (ii) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707‑A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member. 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value #### 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707‑320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor) other than the real loss‑maker mentioned in subsection 707‑315(1) of that Act for the bundle; and (b) both the real loss‑maker and the value donor became members of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (ca) neither the real loss‑maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (ii) a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (ii) section 713‑540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (2) It must have been possible for the real loss‑maker to have transferred the loss to the value donor under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss‑maker at the initial transfer time the amount worked out using the formula:  > Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707‑327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss‑maker to the transferee. > total of real loss‑maker’s non‑foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss‑makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) included in a bundle of losses: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. #### 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value (1) This section affects the calculation of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707‑325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936, in the bundle). > Note: This section does not affect the calculation of the real loss‑maker’s modified market value for other purposes (such as the real loss‑maker being a value donor for the purposes of another application of section 707‑325 of this Act). (3) One condition is that the event was an injection of capital directly into the real loss‑maker by the value donor mentioned in section 707‑325 of this Act. (c) that would have caused subsection 707‑325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss‑maker’s modified market value (even if no other events described in subsection 707‑325(4) of that Act had occurred), apart from this section. (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss‑maker (whether or not the event also involved either the value donor or the real loss‑maker); or (1) This section has effect for the purposes of working out under Subdivision 707‑C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707‑325, as if there were added to the modified market value of the real loss‑maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (c) the loss is not a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707‑A of that Act at the initial transfer time had the company: > Note: This section has effect even if the amount added to the real loss‑maker’s modified market value under section 707‑325 is nil because the value donor’s modified market value is nil. (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707‑325, as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (4) If the transferee mentioned in subsection 707‑325(1) chooses, sections 707‑310, 707‑335 (except paragraph 707‑335(2)(a)) and 707‑340 of the Income Tax Assessment Act 1997 (and subsections 707‑315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: > Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707‑325(1)(d) and (e) and subsection 707‑325(2) in an application of section 707‑325 separate from the application of that section mentioned in paragraph (1)(a) of this section. > Note: This means that a loss that provided a basis for section 707‑325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. (b) in connection with the requirement that it must have been possible for a company (the notional transferor) to transfer to another company (the notional transferee) for an income year a loss under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997. (b) ends immediately after the initial transfer time mentioned in subsection 707‑320(1) of the Income Tax Assessment Act 1997. > Note: For the purposes of identifying the trial year using the definition in section 707‑120 of the Income Tax Assessment Act 1997, the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time. (1) Subsection (3) of this section affects the calculation, under section 707‑325 of the Income Tax Assessment Act 1997 and section 707‑325 of this Act, of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (the formation time) the group became a consolidated group; and (b) the provisions described in subsection 707‑327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707‑327(1)(b) and (c) of this Act as if the bundle included the loss; and (d) subsection 707‑325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707‑325(1) of this Act chooses that this section apply in relation to the real loss‑maker. (2) Section 707‑325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. (3) Disregard for the purposes of subsection 707‑325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707‑325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or > Note: Disregarding such an event could have a direct or indirect effect on the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss‑maker’s modified market value calculated under section 707‑325 of the Income Tax Assessment Act 1997, if the real loss‑maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707‑325 of this Act to add an amount to the real loss‑maker’s modified market value for those purposes. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) that: (b) was transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from an entity other than the real loss‑maker. (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997. Disregard an event that is described in subsection 707‑325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707‑325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004. (1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss‑maker) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time) the transferee became the head company of a consolidated group; and (ii) the conditions in one or more of paragraphs 165‑15(1)(a), (b) and (c) did not exist in relation to the real loss‑maker; and (da) the real loss‑maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non‑transferred losses) of the same sort that the transferee made without a transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non‑transferred losses). (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. <table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Limit on utilising the losses</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For this income year:</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the losses that the transferee may utilise cannot exceed:</span></p></td></tr></thead><tbody><tr><td style="width:20.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:120.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The first income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span style="font-size:8pt; vertical-align:2pt">1</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The second income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) </span><span style="font-size:8pt; vertical-align:2pt">2</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the amount of the losses utilised for the income year mentioned in item</span><span> </span><span>1</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The third income year ending after the initial transfer time, or a later income year</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time</span></p></td></tr></tbody></table> ``` (4) Subdivision 707‑C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707‑A of that Act. > Note: This has 2 effects. First, Subdivision 707‑C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707‑A of that Act). (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). (7) This section does not limit the transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company. In working out when a choice may be made under subsection 707‑325(5), 707‑327(5), 707‑328A(4) or 707‑350(5), ignore losses to which section 713‑535 of the Income Tax Assessment Act 1997 applies. > Note: That section deals with losses transferred under Subdivision 707‑A of that Act from certain wholly‑owned subsidiaries of life insurance companies that are members of a consolidated group. Section 707‑405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act. (1) This section reduces the adjustable value of a notional asset that section 40‑35, 40‑37, 40‑38, 40‑40 or 40‑43 treats the head company of a consolidated group as holding, if: (b) that section treats the leaving entity as holding a notional asset because of section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997. > Note: Section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time. The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences. (1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event) happening involving an entity (the originating entity) and another entity (the recipient entity) if: (a) the event occurs in connection with a life insurance company (the member life insurance company) becoming a member of a consolidated group; and (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest) in a company or in another trust. (a) a life insurance company transfers an asset (also the original asset) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320‑200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset) to its segregated exempt assets where, apart from this Subdivision, section 320‑255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event) is made in connection with the life insurance company (also the member life insurance company) becoming a member of a consolidated group. (1) This Subdivision applies only if the originating entity (for a section 713‑505 case) or the life insurance company (for a section 713‑510 case) chooses that it apply. (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713‑510 of the Income Tax Assessment Act 1997; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713‑510 of the Income Tax Assessment Act 1997; and (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs. This Act, and the Income Tax Assessment Act 1997, apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group. (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain) that the originating entity would have made as a result of the deferral event is disregarded; and (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount) under paragraph 320‑15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (1) This section operates if, after the deferral event happens, another event (the new event) happens where the new event is: (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (i) the original asset being transferred to or from the company’s virtual PST under section 320‑180, 320‑185 or 320‑195 of the Income Tax Assessment Act 1997; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320‑235, 320‑240 or 320‑250 of that Act; or (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. > Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713‑505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (1) For a section 713‑505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713‑535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: (a) an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group at a time (the leaving time); and (b) but for the cessation of membership and section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision. Sections 716‑340 and 716‑345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. <table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:345.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Extended operation of sections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 1</span><br><span style="font-weight:bold">Sections</span><span style="font-weight:bold"> </span><span style="font-weight:bold">716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">340 and 716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">345 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> operate in relation to:</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 2</span><br><span style="font-weight:bold">In the same way as they operate in relation to:</span></p></td></tr></thead><tbody><tr><td style="width:5.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:161.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>46</span><span>‑</span><span>90 of that Act</span></p></td><td style="width:156.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>40</span><span>‑</span><span>455 of that Act</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software pool created under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure allocated to a software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Software, expenditure on which was in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>In</span><span>‑</span><span>house software, expenditure on the development of which is allocated to a software development pool</span></p></td></tr></tbody></table> ``` (1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: Section 703‑30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004. (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time) a wholly‑owned subsidiary of the entity that became the head company of the group (the head entity), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier‑1 company of the group at the formation time. Despite the amendment of section 719‑30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) Section 719‑160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719‑160(3) of the Income Tax Assessment Act 1997. (3) However, that effect of section 719‑160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division. (2) Paragraphs 701‑1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier‑1 company at the time the MEC group came into existence. (a) the entity and one or more other entities were members of a potential MEC group as eligible tier‑1 companies, throughout the period: (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier‑1 company, at the time the transitional group came into existence. To avoid doubt, sections 707‑325 and 707‑327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719‑305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707‑A of that Act. Subsection 719‑325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006. (1) A reference in an agreement to item 25 of the table in subsection 721‑10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: (1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: Division 725 applies to a scheme entered into on or after 1 July 2002. It also applies to a scheme entered into on or after 27 June 2002, but only if: ### Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (1) Division 727, as inserted by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 and amended by the New Business Tax System (Consolidation and Other Measures) Act 2003, applies to a scheme entered into on or after 1 July 2002. (b) a presumed indirect value shift that happens under the scheme and affects a realisation event that happens on or after 1 July 2002. (a) the economic benefits taken into account in determining that the scheme has resulted in that indirect value shift or presumed indirect value shift include economic benefits provided by: > Note: In that case, the consequences of the trigger event are worked out under Division 138 or 139 of the Income Tax Assessment Act 1997: see items 13 and 14 of Schedule 15 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002. (1) An indirect value shift does not have consequences under Division 727 of the Income Tax Assessment Act 1997 if, to the extent of at least 95% of their total market value, the greater benefits consist entirely of: (a) a right to have services that are covered by section 727‑240 of that Act provided directly by the losing entity to the gaining entity; or (d) if the losing entity’s 2002‑2003 income year ends before 30 June 2003—the start of the losing entity’s 2004‑2005 income year. (2) For the purposes of section 727‑850 (about a presumed indirect value shift affecting a realisation event) of the Income Tax Assessment Act 1997, subsection (1) of this section applies to the presumed indirect value shift: #### 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (2) Paragraph 727‑470(2)(a) of the Income Tax Assessment Act 1997 (as in force immediately before the commencement of this section) continues to have effect in relation to the indirect value shift as if the repeals and amendments made by Schedule 1, Parts 1 and 2 of Schedule 3 and Schedule 8 to the Tax Laws Amendment (Small Business) Act 2007 had not been made. ## Division 700 Application of Part 3‑90 of Income Tax Assessment Act 1997 ## 700‑1 Application of Part 3‑90 of Income 700‑1 Application of Part 3‑90 of Income Tax Assessment Act 1997 (1) Part 3‑90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Act (No. 1) 2002 and amended by: (2) Section 713‑50 of the Income Tax Assessment Act 1997 (about factors to consider in determining destination of distribution by non‑fixed trust) applies for the purposes of this Part in the same way as it applies for the purposes of Part 3‑90 of that Act. ## Division 701 Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years ### Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years ## Subdivision 701 ‑A—Preliminary ## 701‑1 Transitional group and transitiona 701‑1 Transitional group and transitional entity (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly‑owned subsidiary of the entity (the future head company) that became the head company of the group; or (ii) at some time during that period, the entity was a wholly‑owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (ii) it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. ## 701‑5 Chosen transitional entity 701‑5 Chosen transitional entity (1) If a group is a transitional group, its head company may, subject to subsection (3), choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (3) If the choice is to be made after the end of the period mentioned in paragraph (2)(a) and before the end of the day mentioned in paragraph (2)(b), it cannot be made unless each entity in relation to which the conditions in subsection (5) are satisfied has agreed to it being made. (a) the entity (the leaving entity) ceased to be a subsidiary member of the group before the choice was made (in a subsection (3) case) or before the revocation took place (in a subsection (4) case); and (b) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; and (c) the asset had become that of the head company because that section applied when a chosen transitional entity (whether or not the same entity as the leaving entity) became a subsidiary member. ## 701‑7 Working out the cost base or reduc 701‑7 Working out the cost base or reduced cost base of a pre‑CGT asset after certain roll‑overs Section 716‑855 applies for the purposes of this Division in the same way as that section applies for the purposes of Part 3‑90 of the Income Tax Assessment Act 1997. ## 701‑10 Interpretation 701‑10 Interpretation is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705‑B of that Act and with this Division. ## Subdivision 701 ‑B—Modified application of provisions 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity ## 701‑15 Tax cost and trading stock value 701‑15 Tax cost and trading stock value not set for assets of chosen transitional entities Section 701‑10 (cost to head company of assets of joining entity) and subsection 701‑35(4) (setting value of trading stock at tax‑neutral amount) of the Income Tax Assessment Act 1997 do not apply to the assets of a chosen transitional entity. > Note: The fact that the head company inherits the entity’s history under section 701‑5 of that Act when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time. ## 701‑20 Working out allocable cost amount 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities #### 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities (2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non‑chosen subsidiary) is worked out in a special way. (b) for each sub‑group (see subsection (6)) that exists in relation to the non‑chosen subsidiary—the sub‑group’s notional allocable cost amount (see subsection(5)) for the non‑chosen subsidiary. (4) The head company adjusted allocable amount for the non‑chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if; (b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of head company’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub‑group in relation to the non‑chosen subsidiary. (5) For each sub‑group that exists in relation to the non‑chosen subsidiary, there is a sub‑group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non‑chosen subsidiary if: (a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non‑chosen subsidiary and the entities comprising the sub‑group; and (c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub‑group membership interests (see subsection (6)) in relation to the sub‑group, and any such entity held those membership interests during the period when it actually held them; and (d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of chosen transitional entity’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub‑group. (6) If a chosen transitional entity holds membership interests in a non‑chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non‑chosen subsidiary: (a) the chosen transitional entity and each interposed non‑chosen subsidiary comprise a sub‑group in relation to the non‑chosen subsidiary (unless the non‑chosen subsidiary is included in a sub‑group in relation to another non‑chosen subsidiary); and (i) the membership interests that the chosen transitional entity holds directly in the non‑chosen subsidiary or in any of the interposed non‑chosen subsidiaries; (ii) the membership interests that each interposed non‑chosen subsidiary holds directly in the non‑chosen subsidiary or in any of the other interposed non‑chosen subsidiaries. ## 701‑25 No operation of value shifting an 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities #### 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities If any provision of the Income Tax Assessment Act 1997 would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply. > Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred. ## 701‑32 No adjustment of amount of liabil 701‑32 No adjustment of amount of liabilities required in working out allocable cost amount (1) This section has effect for the purposes of applying section 705‑70 (step 2 of allocable cost amount) of the Income Tax Assessment Act 1997 in relation to a transitional entity. (2) In spite of subsection 705‑70(1A) of that Act, if the amount of an accounting liability of the transitional entity would be different when it becomes an accounting liability of the transitional group, that difference is not taken into account in working out the amount of the liability. ## 701‑35 Act, transaction or event giving 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different #### 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different (a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset (the roll‑over asset) for which there was: (ii) roll‑over relief under section 40‑340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and (i) became an asset of the head company when the transitional group came into existence because subsection 701‑1(1) (the single entity rule) of that Act applies; or differs at that time from what it would have been if the act, transaction or event that gave rise to the CGT event had not occurred in relation to the roll‑over asset; then the provisions mentioned in subsection (2) apply as if the act, transaction or event had not occurred in relation to the roll‑over asset. (a) the act, transaction or event mentioned in subsection (1) happened before a demerger and in connection with the demerger; and (b) before the transitional group came into existence, at least one of the following entities ceased to be a member of the demerger group because of the demerger: (i) the originating company in relation to the roll‑over, or the transferor in relation to the roll‑over relief, was a foreign resident; and (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as a transitional foreign‑held subsidiary of the group. ## 701‑40 When entity leaves transitional g 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets #### 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets (1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied. (2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset. (a) the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and (b) former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset. (4) The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group. (6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses. ## 701‑45 When entity leaves transitional g 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets #### 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets (b) just before the transitional group came into existence, the entity that became the head company held a pre‑CGT asset; and (d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre‑CGT asset and is held by the head company only because the entity is taken by subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company. (2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence. ## 701‑50 Increased allocable cost amount f 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity #### 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity (1) This section provides for an addition to the step 1 amount for working out under section 711‑20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity) that ceases to be a subsidiary member of the transitional group at a time (the leaving time), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701‑1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount for paragraph</span><span> </span><span>(2)(c)</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">If, because of the circumstances described in paragraphs</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(a) and (b):</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">The amount is:</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:180.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following provisions applied to the entity:</span></p><p class="Tablea"><span>(a) former section</span><span> </span><span>61A of the </span><span style="font-style:italic">Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(b) former Subdivision</span><span> </span><span>57</span><span>‑</span><span>I in Schedule</span><span> </span><span>2D to the</span><span style="font-style:italic"> Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(c) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(4) of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td><td style="width:148.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the amount treated as being the cost of the asset under that provision; and</span></p><p class="Tablea"><span>(b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>2</span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following subsections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span><span> applied to the entity:</span></p><p class="Tablea"><span>(a) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(5);</span></p><p class="Tablea"><span>(b) 58</span><span>‑</span><span>70(3)</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The amount treated as being the cost, or the first element of the cost, of the asset under that subsection</span></p></td></tr></tbody></table> ``` (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997, as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="4" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amounts and provisions for different dates of acquisition</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Date of the acquisition</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Amount</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Provision of Division</span><span style="font-weight:bold"> </span><span style="font-weight:bold">58 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> applying to the acquisition and the working out of the amount</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:76.7pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>160</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>220</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>After 30</span><span> </span><span>June 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>First element of the cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subsection</span><span> </span><span>58</span><span>‑</span><span>70(5)</span></p></td></tr></tbody></table> ``` > Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. > Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and ## Division 701A Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group ### Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity ## 701A‑1 Continuing majority‑owned entity, 701A‑1 Continuing majority‑owned entity, designated group etc. (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: ## 701A‑5 Modified application of Part 3‑90 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity #### 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70‑45 to 70‑70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). ## 701A‑7 Modified application of Part 3‑90 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity #### 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420‑51 to 420‑58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). ## 701A‑10 Modified application of Part 3‑9 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity #### 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (a) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority‑owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority‑owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority‑owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority‑owned entity became a subsidiary member of the group, there was roll‑over relief under section 40‑340 of the Income Tax Assessment Act 1997. (a) while the asset is, because subsection 701‑1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, its tax cost setting amount is taken to be equal to the continuing majority‑owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711‑30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997. (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset becomes that of an entity (a new asset holder) other than the head company because subsection 701‑1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder) acquiring some or all of the membership interests in the new asset holder; and (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset is acquired by another entity (a new asset holder) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll‑over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value asset just before the acquisition; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. ## Division 701B Modified application of provisions of Income Tax Assessment Act 1997 relating to CGT event L1 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 ## 701B‑1 Modified application of CGT Conso 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 #### 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 (b) members of the consolidated group or the MEC group mentioned in subsection 104‑500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701‑1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701‑1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (3) If this section applies, neither subsection 104‑500(4) nor subsection 104‑500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year. ## Division 701C Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures ### Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures ## Subdivision 701C ‑A—Overview ## 701C‑1 Overview 701C‑1 Overview (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C‑B); and (b) modifies certain rules in Part 3‑90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C‑C). > Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719‑2 and 719‑10 of this Act). ## Subdivision 701C ‑B—Membership rules allowing foreign holding 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership ## 701C‑10 Additional membership rules wher 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company #### 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(ii) of that Act (see subsection 719‑2(3) of this Act). (b) a trust (a non‑resident trust) that does not meet the requirements in any item of the table in section 703‑25 of the Income Tax Assessment Act 1997. (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non‑resident company or a non‑resident trust; or Test entity must be a subsidiary member on assumption that non‑resident companies and non‑resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non‑resident company or non‑resident trust were a subsidiary member of the group. (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv). ## 701C‑15 Additional membership rules wher 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership #### 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(iii) of that Act (see subsection 719‑2(3) of this Act). (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C‑10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3). ## 701C‑20 Transitional foreign‑held subsid 701C‑20 Transitional foreign‑held subsidiaries and transitional foreign‑held indirect subsidiaries If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C‑10 are met; and (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (ii) an entity that is a transitional foreign‑held indirect subsidiary of the group because of another application of this paragraph; Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign‑held indirect subsidiary would need to have satisfied the set of requirements in either section 701C‑10 or 701C‑15 ## Subdivision 701C ‑C—Modifications of tax cost setting rules ## Application and object Application and object (a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and (2) Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001 (the new Act) applies to the plant on this basis: (a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant’s opening adjustable value; and (b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and (c) if you excluded an amount from your assessable income under section 42‑290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999—the cost of the plant, and its opening adjustable value, are reduced by that amount; and (d) if subparagraph (1)(b)(ii) applies to you—you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi‑owner of the plant under the former Act continue. (3) If you were using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis: (a) for the diminishing value method—replace the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate you were using; and (i) replace the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate you were using; and (ii) increase the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note 1: Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced. > Note 2: Small business entities can choose to work out the decline in value of their depreciating assets under Division 328. (a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or (3) If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40‑70(1) or 40‑75(1) of the new Act that includes the plant’s effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and (2) For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets. (3) For a case where the plant is merged into another depreciating asset, section 40‑125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it. (b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and (a) you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and (b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU’s opening adjustable value. (1) Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001. (2) For a unit of software for which you were deducting amounts under Subdivision 46‑B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis: (d) you must use the same effective life you were using under Subdivision 46‑B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001. (1) This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day. (b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and (c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and (1) This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001. > Note: Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8). (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330‑80 of the former Act for your income year ending on 30 June 2001; and (c) in applying the formula in section 40‑75 of the new Act for the income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The remaining effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these: (i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and (ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (7) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and (b) the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of expenditure incurred in carrying on eligible quarrying operations—the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (i) you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day) after 30 June 2001; or (ii) the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day) after 30 June 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which the start day occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year. there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (1) This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330‑H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and (c) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (i) any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset); (i) any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (4) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (4) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (b) the expenditure would have been transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330‑H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for your income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (1) Despite subsections 40‑35(5), 40‑38(5) and 40‑40(4), there is no additional decline in the value of the notional asset referred to in those subsections if: (a) apart from this section, subsection 40‑35(5), 40‑38(5) or 40‑40(4) would apply because the real asset referred to in that subsection is disposed of; and (a) at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373‑35 of the former Act; and (b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day. (a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and (1) Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time). (2) Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time. (a) you have deducted or can deduct an amount under Subdivision 387‑G of the former Act for an amount (the qualifying amount) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and (b) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and (1) This section applies to you if you have deducted or can deduct an amount under Subdivision 400‑A of the former Act for an amount (the qualifying amount) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400‑A of the former Act. (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and (c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400‑15(3) of the former Act; and (1) Units of plant that you had allocated to a pool under Subdivision 42‑L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act. (a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and (c) in applying the formula in section 40‑70 of the new Act for your income year in which 1 July 2001 occurs—it has a base value equal to that opening adjustable value; and (d) you replace the component in the formula in subsection 40‑70(1) of the new Act that includes an asset’s effective life with the pool percentage you were using for the pool; and (e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40‑115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and (f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset. (3) An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item). > Note 1: You work out the decline in value of an item removed under this subsection under Subdivision 40‑B of the new Act, using the cost for it worked out under section 40‑205 of the new Act. (b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset. (2) The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year) in this way: (a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and (b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section. (a) for a unit of plant (including IRUs and expenditure on software that is not pooled)—its undeducted cost at the end of 30 June 2001; or (b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence—the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or (c) for transport capital expenditure—the entity’s amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or (d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (e) for expenditure on evaluating the impact on the environment of a project—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (f) for assets that were pooled under Subdivision 42‑M or 42‑L of the former Act—the closing balance of the pool at the end of 30 June 2001. (4) The asset’s base value for applying the formula in section 40‑70 of the new Act for the diminishing value method is that opening adjustable value. (5) The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an item of plant for which you were using the prime cost method—using the rules in section 40‑10 of this Act; and (c) for a unit of software for which the entity was deducting amounts under Subdivision 46‑B of the former Act—using the rules in subsection 40‑25(2) of this Act; and (f) for an amount of expenditure on evaluating the impact on the environment of a project—using the rules in section 40‑55 of this Act. (6) The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an amount of unrecouped expenditure under Division 330 of the former Act—using the rules in section 40‑35 of this Act; and (b) for an amount of transport capital expenditure under Division 330 of the former Act—using the rules in section 40‑40 of this Act; and (7) The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act. (a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑C of the former Act; or (b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑H of the former Act; or (c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387‑B of the former Act; or (d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; or (e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365. (9) The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001. (10) You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount). (11) You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount. (1) Subsections 40‑65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened: (b) you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act. (a) paragraph 40‑65(6)(a) of the Income Tax Assessment Act 1997 included both events set out in subsection (1) of this section; and (b) subsections 40‑65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events. (1) A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936. (2) An amount you have deducted or can deduct for a water facility under Subdivision 387‑B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40‑F of the new Act. (3) A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936. (a) you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40‑115 (about splitting a depreciating asset) or 40‑125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and (b) it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40‑72 of that Act; (2) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if: (c) it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40‑72 of that Act. (3) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset) before 10 May 2006 if: (b) the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and (d) it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40‑72 of that Act. (a) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you: (b) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001. (2) If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act. (3) Otherwise, Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section. (a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or (b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or (ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life. (1) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001. > Note: If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40\. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997. (1A) Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001. (1B) Subsection (1) applies to a mining, quarrying or prospecting right (the new right) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if: (i) the other company is a member of the same wholly‑owned group as the original holder and was a member of that group just before that day; and (ii) the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer. (1D) Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if: (b) the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001. (a) you acquired, under an interest realignment arrangement, an interest (a new interest) in a mining, quarrying or prospecting right; and (b) the interest was acquired in exchange for one or more other interests (old interests) in other mining, quarrying or prospecting rights; and Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001. (a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or (b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership; the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act. (3) An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that: (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act. (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act. (6) Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243. (7) An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if: (a) you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and (8) The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section. (c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act. (2) Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001. A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act. if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011. (2) The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011. (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset for an income year is the amount worked out under section 40‑130 if: (a) the income year is the year in which you start to use the asset, or have it installed ready for use, for a taxable purpose; and (b) subsection (2) (about businesses with turnover less than $500 million) applies to you for the year and for the income year in which you started to hold the asset (if that was an earlier year); and > Note 1: An effect of paragraph (1)(a) is that this Subdivision only applies to one income year per asset. See also subsection 40‑135(1). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $500 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. Exception—assets for which the decline in value is worked out under section 40‑82 or Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (3) However, this section does not apply to a depreciating asset for an income year if you work out the decline in value of the asset for the income year under any of the following: (1) For the purposes of paragraph 40‑120(1)(c) and section 328‑182, you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you: > Note: Section 328‑182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997. (i) entering into a contract under which you hold the post‑12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑12 March 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post‑12 March 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (8) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (9) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (10) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (1) For the purposes of section 40‑120, the decline in value for the income year in which paragraph 40‑120(1)(a) is satisfied (the current year) is: > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 12 March 2020 to 30 June 2020 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2020 to 30 June 2021. (a) 50% of the asset’s cost as at the end of the current year, disregarding any amount included in the second element of the asset’s cost after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997, assuming its cost were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (3) However, the amount worked out under subsection (2) for an income year cannot be more than the amount that is the asset’s cost for the year. (a) 50% of the sum of the asset’s opening adjustable value for the current year and any amount included in the second element of its cost for that year, disregarding any amount included in that second element after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997 assuming: (ii) for the prime cost method—the component “Asset’s \*cost” in the formula in subsection 40‑75(1) of that Act (as adjusted under that section) were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (b) for the prime cost method—the sum of its opening adjustable value for the income year and any amount included in the second element of its cost for that year. (1) The decline in value of a depreciating asset is not worked out under this Subdivision for an income year if this Subdivision already applied in working out the decline in value of the asset for an income year. (2) For an income year later than the year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (3) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (4) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) You may choose that the decline in value of a particular depreciating asset for an income year, and subsequent income years, is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the first income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. If this Subdivision applies to work out the decline in value of a depreciating asset you hold for an income year, no other provision of this Act or the Income Tax Assessment Act 1997 applies to work out that decline in value. (1) For the purposes of this Subdivision, you are covered by this section for a depreciating asset if, on or before 30 June 2023: (2) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (3) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or Exception—assets for which the decline in value is worked out under Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (a) the asset is allocated to a low‑value pool, or expenditure on the asset is allocated to a software development pool (see Subdivision 40‑E of the Income Tax Assessment Act 1997); or (b) you or another taxpayer has deducted or can deduct amounts for the asset under Subdivision 40‑F of the Income Tax Assessment Act 1997 (about primary production depreciating assets). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $5 billion; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this section. (ii) if the 2019‑20 income year ends on or before 6 October 2020—the sum of your ordinary income (if any) and statutory income (if any) for the 2019‑20 income year; and (c) the sum of the amounts worked out under subsection (3) for the 2016‑17, 2017‑18 and 2018‑19 income years exceeds $100 million. (b) next, work out the cost of each of those assets (including any amounts included in the second element of the asset’s cost at a time that is in the income year); (4) For the purposes of subsection (3), disregard an asset if, at the time you first used the asset, or had it installed ready for use, for a taxable purpose: (a) it was not reasonable to conclude that you would use the asset principally in Australia for the principal purpose of carrying on a business; or (5) For the purposes of paragraph (3)(b), to work out the cost of a depreciating asset that is capital works (see section 43‑20 of the Income Tax Assessment Act 1997): (a) disregard section 40‑45 of that Act and work out the cost of the capital works using Subdivision 40‑C of that Act; and (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under subsection (3) if: (a) where section 40‑155 covers you for the current year (regardless whether section 40‑157 also covers you for the current year)—an exclusion applies to you and the asset for the current year under section 40‑165 (about exclusions for businesses with turnover of $50 million or more); or (ii) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s start time occurs in the current year—the asset’s cost as at the end of the current year, disregarding any amount included in the asset’s cost after 30 June 2023; or (b) if the asset’s start time occurred in an earlier year—the sum of its opening adjustable value for the current year and any amount included in the second element of its cost for the current year, disregarding any amount included in the asset’s cost after 30 June 2023. > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 6 October 2020 to 30 June 2021 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2021 to 30 June 2022. (a) where paragraph 40‑160(2)(a) applies—section 40‑155 would not cover you for the income year if the reference in that section to $5 billion were instead a reference to $50 million; and (i) entering into a contract under which you hold the post‑6 October 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑6 October 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of satisfying paragraph 40‑160(1)(a) for the post‑6 October 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you already satisfied paragraph 40‑160(1)(a) of this Act for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (9) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (1) For the purposes of subsections 40‑160(2) and 40‑170(1A), an exclusion applies to you and an asset for an income year if any of the exclusions in this section applies in relation to the asset. (4) This exclusion applies in relation to the asset if the asset is available for use, at any time in the income year, by any of the following: (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under this section if: (ii) you started to use the asset, or have it installed ready for use, for a taxable purpose in an earlier income year; and (b) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under section 40‑82 of the Income Tax Assessment Act 1997—the amount worked out under subsection (3); or (b) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under Subdivision 40‑BA of this Act—the amount worked out under subsection (4); or Assets affected by section 40‑82 of the Income Tax Assessment Act 1997 (about assets costing less than $150,000, medium sized businesses) (a) the amount that would be the asset’s decline in value for the year under section 40‑82 of the Income Tax Assessment Act 1997, assuming the reference in subparagraph 40‑82(3A)(b)(ii) of that Act to 31 December 2020 were instead a reference to the 2020 budget time; and (a) the amount that would be worked out under paragraph 40‑130(2)(a) or (4)(a) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(a) and (4)(a) to 30 June 2021 were instead references to the 2020 budget time; and (c) the amount that would be worked out under paragraph 40‑130(2)(b) or (4)(b) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(b) and (4)(b) to “the amount worked out under paragraph (a)” were instead references to “the amounts worked out under paragraphs 40‑170(4)(a) and (b)”. (a) the amount that would be the asset’s decline in value for the year under Division 40 of the Income Tax Assessment Act 1997, disregarding any amounts included in the eligible second element worked out under section 40‑175 of this Act for the asset for the year; and The amount worked out under this section (the eligible second element) for a depreciating asset for an income year is the sum of any amounts included in the second element of the asset’s cost at a time that is in both of the following periods: (1) For an income year later than a year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (2) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (3) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) This section applies if the decline in value for a depreciating asset for an income year is worked out under this Subdivision, and at a time (the balancing adjustment time) in a later income year: (i) it becomes not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (b) none of the requirements in paragraphs 40‑295(1)(a), (b) or (c) of the Income Tax Assessment Act 1997 are satisfied in relation to the asset. (2) For the purposes of Subdivision 40‑D of the Income Tax Assessment Act 1997 assume that, at the balancing adjustment time, you stop using the asset, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again. (3) For the purposes of section 40‑180 of the Income Tax Assessment Act 1997 assume that the reference in item 3 of the table in subsection 40‑180(2) of that Act to “because you stop using it for any purpose expecting never to use it again” were instead a reference to “because of section 40‑185 of the Income Tax (Transitional Provisions) Act 1997”. (4) If a balancing adjustment event happens to a depreciating asset you hold because of this section, this Subdivision cannot apply to work out the decline in value of the asset for a later income year. (1) You may choose that the decline in value of a particular depreciating asset for an income year is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year. (1) Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40. (a) you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset: (ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and (4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day. (5) The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if: (i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or (ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and  > sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose. (7) Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens: (a) if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b). (i) an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and (ii) the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and (3) The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount. (a) on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and (c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and (ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal; (2) There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal. (3) Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount. If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997. (a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and (b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and: (i) the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, the R&D entity is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—a clawback amount under section 355‑447 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑466 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. (b) section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions. > Note 2: The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and: (i) the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset; (ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, an R&D entity (the partner) that is a partner in the R&D partnership and is entitled to one or more new law deductions for one or more income years for the asset, is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—a clawback amount under section 355‑449 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑468 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s new law deductions mentioned in paragraph (2)(b) of this section. (4) Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event. > Note: Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions. (1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant. (b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and (3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it. (a) there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and (b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act. (2) The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor. (3) The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and <table cellspacing="0" cellpadding="0" style="width:364.2pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:353.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading" style="page-break-inside:avoid"><span>Conditions for small business taxpayers retaining accelerated rates</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Condition</span></p></td></tr></thead><tbody><tr><td style="width:21.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:321.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>The transferee must have been a small business taxpayer for the income year (the </span><span style="font-weight:bold; font-style:italic">start year</span><span>) that includes the time when the entity first used the plant, or first had it installed ready for use.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>2</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>At that time, neither of these applies:</span></p><p class="Tablea"><span>(a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;</span></p><p class="Tablea"><span>(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection</span><span> </span><span>(5).</span></p></td></tr></tbody></table> ``` (4) For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership. (5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement. (a) for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or (i) replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and (ii) increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).  (b) if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11). (c) that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and (d) that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and (e) that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity. (a) for taxable supplies (if any) the entity makes during the year in the course of carrying on a business—the value (as defined by section 9‑75 of the GST Act) of the supplies; and (b) for other supplies the entity makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies. (1) The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for: (a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (c) for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or (d) for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant. (3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115. (4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain. (5) Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee. (i) the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or (a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and (1) A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act. (2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year. For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if: Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act. (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset): and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply. (i) for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or (ii) for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and (c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act. (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and (2) Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act. The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under: (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on: (2) You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act. (3) A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under: (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and (2) Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act. A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act. The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001. If: (d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act; (a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and (a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and (b) the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and (c) paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997. Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years. (1) For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section. (b) the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (b) that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (1) There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea" style="page-break-after:avoid"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a); and</span></p><p class="Tablea" style="page-break-after:avoid"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (b) disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (f) an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division. (4) If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45‑5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest. (5) If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45‑10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest. Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Disregard the use of the following amounts in determining (for the purposes of Subdivision 50‑A of the Income Tax Assessment Act 1997 whether a fund established before 1 July 1997 operates and pursues its purposes in Australia: Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years. (2) However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date. Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if: (b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time. Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years. 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years (1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act. <table cellspacing="0" cellpadding="0" style="margin-left:56.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:258.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Application provisions for specific sections</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-size:9pt; font-weight:bold">Item</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">This section of the </span><span style="font-size:9pt; font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-size:9pt; font-weight:bold"> ...</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">Applies as described in this provision of this Act ...</span></p></td></tr></thead><tbody><tr><td style="width:24.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55(1)</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>95</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>8</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td></tr></tbody></table> ``` (a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and (b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997. > Note: Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year. (b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997; sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997). > Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock. (3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997. (a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and (b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936; > Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal. #### 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997. (1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year. (2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936. (3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year: (a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners; (b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed. > Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year. > Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year. (b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year; the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year. (2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. (3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2). #### 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997. #### 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business (1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. (2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity. > Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997. (1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. (2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value. > Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997. #### 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year. (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. > Note: Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. > Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given). (5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act). (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment. > Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%. (5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%. (6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.  > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section. (b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4). Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age. Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later. Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies. Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3. (4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997. (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%. > Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986. (5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D. > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. (a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and (b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year). (3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and (2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual: (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income. > Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F. > Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997. > Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997. #### 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 (1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012. (2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies. (3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act. (b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009. (2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if: (i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest; (iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or (i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest; (iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009. (2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time. (4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2): (a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and (b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being: (ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and (c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and (d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if: (i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or (ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and (e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and (i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and (ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and (g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest. (a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced: (i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or (ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and (b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5. (2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right. (3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right. (2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. (3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section. Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years. (1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision. > Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision). > Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936). > Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997. (a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936. (1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936. (2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997. > Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997. (3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and (d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; (f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time. > Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and (d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015. (a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or (4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if: (b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset. The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year. (a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and (1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied: (b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and (d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works). (3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936. Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936. (b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006. (2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement. > Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement. Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual: (b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her. 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act (1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee). (2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year: (3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection. #### 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997. Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936). (2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if: (a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; (a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011); (b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986. > Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section. If: (a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and (b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936; Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995. (1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997. (2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997. (3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997. (4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997. > Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one. Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year: (a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and (b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year; the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation. Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset. (b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section); > Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply. (1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if: (a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and (2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value. (4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value. (a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997. (2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less. (1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936: (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. (1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if: (2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by: (a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or (a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or (2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period. Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year: If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997. (1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002. (2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset. (3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required. (i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and (ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and (c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and (f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997). (a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or (1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:  > total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part. (a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or (2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section. (3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1). (1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences. > Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997. (c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets). (4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act. (5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act. Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement. (a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and (2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time. (a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and (ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs. (2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer. (a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and (b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest; (2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event. (3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly. (4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly. <table cellspacing="0" cellpadding="0" style="width:362.55pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:351.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Creating a CGT asset</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">CGT event number</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Applicable amount</span></p></td></tr></thead><tbody><tr><td style="width:50.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D1</span></p></td><td style="width:290.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the incidental costs the originating company incurred that relate to the CGT event</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D2</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the option</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D3</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the right</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>F1</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred on the grant, renewal or extension of the lease</span></p></td></tr></tbody></table> ``` (5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day. A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision. (a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996. (b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. (b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend. (3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities. (1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company. (2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred. (3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company. (1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of: (2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of: (3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note. (1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised. (b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and (ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act. You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and (b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996. (c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and (c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over. (3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. (a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and (c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and (d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act. (3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division. Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years. A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: (1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day. (2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice. (a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and (b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and (a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and (b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and (c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group. (5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004. (6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection. (1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss): (b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions); and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time: (i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or (e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and (f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and (ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred; (2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if: (a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these: (i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset; (ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and (3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act. (a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and (b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section. (5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of: (a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and (b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset. Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. (ii) that could have been deducted, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the deduction had not been limited by the company’s income for that income year; and (ii) that could have been applied, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the application of the loss had not been limited by the company’s capital gains for that income year. 170‑C Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred #### 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years. #### 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). #### Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997. Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997. If: (a) all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (d) that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and (e) the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place. Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years. > introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament. Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day. #### Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting #### 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B. (1) The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day. (2) No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted. #### 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting (1) Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if: (a) the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and (b) none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount. (2) No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount. (1) This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account. (2) For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. > Note 2: If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60. (3) For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)). (4) For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. (5) The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if: (a) during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and (b) the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section. (a) the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and (b) during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components. (7) For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. (8) Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it: (b) the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component. (9) Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component. (10) For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002: (b) lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination; (c) a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination); (e) the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination); (f) the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination). Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period: 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows: (a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and (i) in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and (ii) in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. > Note: A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002. #### 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002: (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:23.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:87.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A franking surplus</span></p></td><td style="width:220.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.009.png" width="175" height="58" alt="Start formula Amount of the class A franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.010.png" width="190" height="56" alt="Start formula Amount of the class B franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.011.png" width="190" height="56" alt="Start formula Amount of the class C franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` #### 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus): (a) a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Original surplus</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:85.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>class A</span></p></td><td style="width:220.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.012.png" width="169" height="38" alt="Start formula Amount of the original class A surplus times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.013.png" width="169" height="38" alt="Start formula Amount of the original class B surplus times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.014.png" width="169" height="38" alt="Start formula Amount of the original class C surplus times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (4) If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit): (a) a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company. (5) The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking deficit into 1997 Act franking debit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Original deficit</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking debit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(4)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:70.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A</span></p></td><td style="width:235.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.015.png" width="164" height="38" alt="Start formula Amount of the original class A deficit times start fraction 39 over 61 end fraction end formula "></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.016.png" width="164" height="38" alt="Start formula Amount of the original class B deficit times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.017.png" width="164" height="38" alt="Start formula Amount of the original class C deficit times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (2) A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if: (c) the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions. (3) The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if: (b) the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and (1) While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit. (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year. (3) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: > Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act. (1) The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account. (a) a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time; (3) If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if: (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity. #### 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If: the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time. (1) Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections. (2) If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year. Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year. Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year. (5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in: that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement. (6) The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (7) The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (2) The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (3) The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (i) are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and (a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and (b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section. (a) whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and (1) This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002. (a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and (3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded. (1) This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002; (2) If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (3) If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (4) If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. (5) If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows: (a) any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and (i) in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and (ii) in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. #### 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF.  #### 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act). (2) If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus): (a) a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF. (4) If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit): (a) a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF. This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period). (1) The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period: (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (1) The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period. (2) The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner. (3) The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5. (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and (d) the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner; the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received. (3) A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time: (1) A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends. (2) However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period. (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (a) the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed: (d) the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and (e) the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return. (2) The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day. (1) The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period. (2) The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made. Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period. (b) on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax); the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed: (c) the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and (d) the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return. (2) The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day. The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period: If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day. If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and If: (a) a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and (b) the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment; In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment. If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment. The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with. If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953. (1) Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period. (a) the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and (b) the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3); the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on: (c) if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or If: Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax. Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division. If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997. (a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day: (3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002. (a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002: > Note: As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date. (b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997. In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003. (1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year. (a) a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of: (i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time; (iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period; (2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if: (b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time: (ii) the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. > Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. > Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. (7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table: <table cellspacing="0" cellpadding="0" style="width:365.35pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount of the franking credit and the exempting debit</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">If:</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the credit and debit is:</span></p></td></tr></thead><tbody><tr><td style="width:22.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The period starts immediately after 7.30</span><span> </span><span>pm by legal time in the Australian Capital Territory on 13</span><span> </span><span>May 1997</span></p></td><td style="width:141.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Both these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was not in surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>All these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was in surplus at the start of the period;</span></p><p class="Tablea"><span>(c) the surplus in the account at the switch time is greater than the surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the franking surplus in the Australian company’s franking account at the switch time; and</span></p><p class="Tablea"><span>(b) the franking surplus in the Australian company’s franking account at the start of the period</span></p></td></tr></tbody></table> ``` (a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and (b) the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period. Subdivision 235‑I of the Income Tax Assessment Act 1997 applies to assets acquired by the trustee of an instalment trust in: (1) Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years. (2) However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time). (3) The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997. Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997. (2) Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in: (1) Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that: (b) is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose. (a) if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007. > Note: To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997. (b) contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option; the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option. (3) For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5). (4) If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is: (a) the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less (b) the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest. (5) If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is: (6) If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil. (1) If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one. (2) If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year. (3) If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year. (a) for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and (b) for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year: Step 1. Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. Step 2. Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3). Step 3. If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year. > Note: Example: Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75): (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred: (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times: (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate. Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008. (a) the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and (b) the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities: (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (i) the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or (ii) the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and (f) none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made: (i) Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event; (ii) a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year. (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (b) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (c) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year #### 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year (a) the requirements set out in paragraphs 275‑610(1)(a), (b) and (c) of the Income Tax Assessment Act 1997 are satisfied in respect of an amount of non‑arm’s length income of a managed investment trust in relation to an income year; and (b) the managed investment trust became a party to the scheme mentioned in paragraph 275‑610(1)(a) of that Act before the day on which the Bill that became the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 was introduced into the House of Representatives; and Division 276 of the Income Tax Assessment Act 1997 as inserted in that Act by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (the amending Act) applies as set out in subitem 1(1) of Schedule 8 to the amending Act. (b) if the trustee of the trust has made a choice for the purposes of paragraph 1(1)(b) of Schedule 8 to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016—the first income year starting on or after 1 July 2015; or (c) if the trustee of the trust has made a choice for the purposes of subparagraph 276‑10(1)(e)(i) of the Income Tax Assessment Act 1997 in respect of the 2016‑17 income year—that income year. (c) the trust is an AMIT for an income year (the discovery year) that is the starting income year or a later income year. (1) This section applies if the trust has an under or over of a character in the discovery year relating to the base year. (b) if, at a time, the trust sent its members distribution statements for an income year that is prior to the starting income year—assume that the trust sent those members AMMA statements for that income year at that time. (3) For the purposes of Division 276 of the Income Tax Assessment Act 1997, treat the under or over mentioned in subsection (1) as an under or over of the AMIT, in the discovery year relating to the base year, of the character mentioned in that subsection. (a) had the under or over mentioned in subsection (1) been discovered before the starting income year, this Act would have operated to produce a particular effect (the pre‑AMIT scheme effect) for the base year in relation to the amount or amounts reflected in the under or over; and 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT #### 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT (b) working out the amount (if any) of the entity’s capital gain under subsection 104‑70(4) of the Income Tax Assessment Act 1997. (3) For the purpose of working out the amount of the non‑assessable part mentioned in paragraph 104‑70(1)(b), treat the following provisions as being in operation at the time the payment was made: (b) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in paragraph (a). (4) Subsection (3) does not apply to the extent (if any) that the entity, in the income tax return that it lodged for the income year in which the payment was made, included the amount of the payment in its assessable income for that income year. (5) For the purposes of section 118‑20 of the Income Tax Assessment Act 1997, treat this section as being in Part 3‑1 of that Act. (2) The Commissioner cannot amend the entity’s assessment for the income year in which the payment was made in a particular way if: (b) the Commissioner could not amend the assessment in that way if the following provisions were in operation at the time the payment was made: (ii) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in subparagraph (i); and Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82‑10F). (2) The object of this section is to apply (with modifications) provisions limiting deductibility in respect of certain contributions made during the period that: (a) Subdivisions AA and AB of Division 3 of Part III of the Income Tax Assessment Act 1936, as in force just before they were repealed by the Superannuation Legislation Amendment (Simplification) Act 2007; (b) any other provision of the Income Tax Assessment Act 1936, or of any instrument made under that Act, to the extent that it relates to the operation of those Subdivisions; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of those Subdivisions. (b) the deduction limit mentioned in section 82AAC for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (c) the deduction limit mentioned in section 82AAT for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (d) Division 290 of the Income Tax Assessment Act 1997 did not apply to contributions made during the income year mentioned in paragraph (a). (2) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of a defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection and subsection (4), the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 5 September 2006; (b) the defined benefit interest mentioned in paragraph (2)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 5 September 2006, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (2)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (4) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of the defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection, the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 12 May 2009; (b) the defined benefit interest mentioned in paragraph (4)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 12 May 2009, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (4)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (1) The object of this section is to apply (with modifications) provisions relating to excess non‑concessional contributions tax in respect of certain contributions made during the period that: (b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision. (ea) in a case where paragraph 292‑95(1)(b) of that Act would have allowed the contribution mentioned in that paragraph to be made at a time within that period—that paragraph allowed the contribution to be made on or before 30 June 2007; and (f) paragraph 292‑95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and (fa) in a case where subsection 292‑100(2), (4), (7) or (8) of that Act would have allowed the contribution mentioned in that subsection to be made at a time within that period—that subsection allowed the contribution to be made on or before 30 June 2007; and (g) paragraph 292‑100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and (h) contributions made during that period that are covered under section 292‑100 of that Act reduce the person’s CGT cap amount for the 2007‑2008 financial year in accordance with subsection 292‑105(2) of that Act (and despite subsection (1) of that section); and (i) if the conditions in subsection (4) are satisfied—the person’s excess non‑concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and (b) the Commissioner gives the person a transitional release authority under subsection 292‑80A(2) in response to the application; and (c) the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292‑80B within 21 days after the date of the release authority; and (d) the superannuation provider pays the person the amount required under section 292‑80C in relation to the transitional release authority. (b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act). (6) The amount to be included in the first person’s amount of non‑concessional contributions under subparagraph (3)(b)(ii) is the sum of: (a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and (b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made. (c) under Division 295 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)), the contribution is included in the assessable income of the superannuation provider in relation to the superannuation plan to which the contribution is made; and (8) For the purposes of paragraph (7)(b), treat the person as an employee of the other entity if the person would be treated as an employee of the other entity under Division 290 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)). (1) A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007. (2) The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292‑80(3)(b)(i), the person would have excess non‑concessional contributions for the financial year mentioned in paragraph 292‑80(3)(a). (4) For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out: The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 21 days after the date of the release authority. (1) A superannuation provider that has been given a transitional release authority in accordance with section 292‑80B must pay to the person within 30 days after receiving the release authority the least of the following amounts: (a) if the person requests the provider in writing to pay a specified amount in relation to the release authority—that amount; (c) the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person in complying superannuation plans. > Note 1: Section 288‑95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection. > Note 2: Section 288‑100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority. > Note 3: For reporting obligations on the superannuation provider in these circumstances, see section 390‑65 in Schedule 1 to the Taxation Administration Act 1953. (2) The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person in complying superannuation plans. (3) Section 307‑125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section. (a) your non‑concessional contributions cap for the 2015‑2016 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsection 292‑85(7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 applies after the commencement of this section as if: (d) subsection 292‑85(6) of that Act as so amended had been applied (taking into account paragraph (c) of this subsection) for the purposes of working out your non‑concessional contributions cap for the 2016‑2017 financial year. (2) For the purposes of working out your non‑concessional contributions caps for the 2017‑2018 financial year and the 2018‑2019 financial year, if: (a) your non‑concessional contributions cap for the 2016‑2017 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsections 292‑85(6) and (7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 apply after the commencement of this section as if the amount worked out under subsection 292‑85(5) of that Act as so amended were $380,000. (3) To avoid doubt, this section does not affect your non‑concessional contributions cap for any financial year that ended before 1 July 2017. The tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your non‑concessional contributions (see section 292‑90 of the Income Tax Assessment Act 1997) for the financial year. (2) Subject to section 294‑55, the amendments of Division 294 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Treasury Laws Amendment (2017 Measures No. 2) Act 2017 apply on and after 1 July 2017. Despite sections 294‑30 and 294‑140 of the Income Tax Assessment Act 1997 (which are about when you have excess transfer balance), you do not have excess transfer balance in your transfer balance account on any day in the period of 6 months beginning on 1 July 2017 if: (a) the only transfer balance credits in the account in that period arose under item 1 of the table in subsection 294‑25(1) of that Act (which is about superannuation income streams you have just before 1 July 2017); and (b) the sum of those transfer balance credits exceeds your transfer balance cap, but is less than or equal to $1,700,000; and (c) at the end of the period, the sum of all the transfer balance debits arising in your transfer balance account equals or exceeds the amount of the excess from paragraph (b). (1) Despite subsection 294‑10(2), a transfer balance credit arises under item 4 of the table in subsection 294‑25(1) of the Income Tax Assessment Act 1997 only in relation to a borrowing that arises under a contract entered into on or after 1 July 2017. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2017 is treated as if it arose under a contract entered into before 1 July 2017 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) on 1 July 2017, a transfer balance debit arose in your transfer balance account under item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997; and (b) the sum of all the transfer balance credits that arise in your transfer balance account under item 1 of the table in subsection 294‑25(1) of that Act exceeds the amount that would, apart from this section, be the amount of that debit. (2) Despite column 2 of item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997, the amount of the transfer balance debit is instead equal to the sum worked out under paragraph (1)(b) of this section. 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain > The object of this Subdivision is to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the following legislative changes: (a) the introduction of a transfer balance cap (as a result of Schedule 1 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016); (b) the exclusion of transition to retirement income streams (and similar income streams) from being superannuation income streams in the retirement phase (as a result of Schedule 8 to that Act). (a) starting on the start of the day on which the Bill that became the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 was introduced into the House of Representatives; and (a) at the start of the pre‑commencement period, a CGT asset of a fund is a segregated current pension asset of the fund; and (i) at a time (the cessation time) in the pre‑commencement period, the asset ceases to be a segregated current pension asset of the fund; or (ii) at the start of 1 July 2017 (also the cessation time), the asset ceases to be a segregated current pension asset of the fund because it supports a superannuation income stream covered by subsection 307‑80(3) of the Income Tax Assessment Act 1997; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (b) the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year is greater than nil; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and #### 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑115(3)(a), the fund makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the fund’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Subsection 295‑390(1) of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). > 2016‑17 non‑exempt proportion means 1 minus the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year. #### 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset (i) the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997 in respect of the trust for the 2016‑17 income year; (ii) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year; and (d) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and #### 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑125(3)(a), the trust makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the trust’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Section 295‑400 of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). (a) unless paragraph (b) applies—1 minus the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997; or (b) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage worked out by subtracting the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year from 100%. This Subdivision applies to an entity that is the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust. For the purposes of this Subdivision, an asset is a 30 June 1988 asset of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust if the entity owned it at the end of 30 June 1988. > Note: Section 295‑90 of the Income Tax Assessment Act 1997 treats these assets as having been acquired on 30 June 1988. (1) The first element of the cost base of each 30 June 1988 asset of the entity’s is the greater of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). (2) The first element of the reduced cost base of each 30 June 1988 asset of the entity’s is the lesser of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). the market value of the asset as at the end of 30 June 1988 is the average of the highest and lowest trade prices for identical assets recorded on 30 June 1988 in whichever of the following markets is applicable: (d) if, on that date, there was a State capital city market (other than the Sydney market) that recorded a higher volume of trading than the Sydney market in identical assets—that State capital city market; (2) For the purposes of this section, an asset is taken to have been listed on an Australian stock exchange on 30 June 1988 if, and only if, on that day the asset had the status of having been granted official quotation by a securities exchange within the meaning of the former Securities Industry Act 1980 or the law of a State or Territory corresponding to that former Act. (b) at any time during the period commencing at the time when the shares were acquired and ending at the end of 30 June 1988, the company paid an amount that was not a dividend to the entity in respect of the shares; (b) at any time during the period commencing at the time when the interest or unit was acquired and ending at the end of 30 June 1988, the trustee of the trust paid an amount to the entity in respect of the interest or unit, being: (i) in a case where the entity was exempt from tax for the year of income in which the payment was made—an amount that, if the entity had not been exempt from tax, would not have been the entity’s assessable income; or the cost base to the entity of the interest or unit as at 30 June 1988 is reduced by so much of the amount as is not attributable to a deduction allowed under former Division 10C or 10D of the Income Tax Assessment Act 1936. (1) Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (2) and (3) of this section apply if an entity exercises rights or options as mentioned in that section to acquire: (b) the greater of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (b) the lesser of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (4) The payment referred to in subsection (2) or (3) can include giving property. To the extent that the payment does, use the market value of the property in working out the amount of the payment. (1) A notice given under subsection 82AAT(1A) or (1CB) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑170 of the Income Tax Assessment Act 1997. (2) A notice given under subsection 82AAT(1C) or (1CD) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑180 of the Income Tax Assessment Act 1997. (1) A proportion of the ordinary income and statutory income of a continuously complying fixed interest ADF of an income year that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).  > Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the income year. > Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the income year. (4) A choice for the purposes of the definition of reckoning time in subsection (5) must be made on or before the date of lodgment of the income tax return of the ADF for the income year to which the choice relates, or before a later day allowed by the Commissioner. > continuously complying fixed interest ADF, in relation to an income year (the current year), means a fund that is a fixed interest complying ADF in relation to each of the following years: > current 25 May balance, in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time: (b) subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 September 1989 is to be added to the balance; (b) a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that day, made a deposit with the ADF that consisted wholly or partly of the roll‑over (as defined in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 as in force on that day) of an eligible termination payment as so defined, being an eligible termination payment that included a concessional component (as so defined). > fixed interest complying ADF, in relation to a year of income, means a complying ADF where both of the following conditions are satisfied: (a) not less than 90% of the amount that, apart from this section, would be the assessable income of the ADF of the income year (other than non‑arm’s length income or amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997) consists of any one or more of the following: (ii) any profit arising on the disposal, redemption, cancellation or maturity of a CGT asset referred to in paragraph 295‑85(3)(b) of the Income Tax Assessment Act 1997; (iii) an amount included in assessable income under Division 16E of Part III of the Income Tax Assessment Act 1936 (or would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply); (ii) virtual PST life insurance policies (as defined in the Income Tax Assessment Act 1997) issued by a life insurance company. > original 25 May balance, in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988. > reckoning time, in relation to an ADF in relation to an income year, means the beginning of the income year, or such other time during the income year as the ADF chooses in accordance with subsection (4). (6) This section does not apply to an ADF in relation to an income year unless the whole of the benefit that would accrue to the ADF from the application of this section in relation to the income year has been, or can reasonably expected to be, passed on to eligible depositors. An election made by the trustee of a complying superannuation fund under subsection 279(4) of the Income Tax Assessment Act 1936 that had effect for the income year of the fund in which 30 June 2007 occurs continues to have effect as if it had been made under section 295‑465 of the Income Tax Assessment Act 1997. Subdivisions 295‑I (no‑TFN contributions) and 295‑J (Tax offset for no‑TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006‑2007 income year ends on a day (the end day) after 1 July 2007 as if: (b) the entity’s no‑TFN contributions income for the entity’s 2007‑2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007‑2008 income year if the contributions concerned had been made in the entity’s 2007‑2008 income year. (2) Division 301 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section because you are a member of the fund in the same way as it would apply if the payments were superannuation member benefits paid to you from a complying superannuation fund. For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. Subdivision 301‑F of the Income Tax Assessment Act 1997 applies in relation to income years starting on or after 1 July 2007. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to the following in respect of an income year that starts on or before 1 July 2021: (b) the amendments of the Income Tax Assessment (1997 Act) Regulations 2021 made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023. (a) a superannuation benefit (the trigger benefit) was paid to a person in the 2020‑21 income year or an earlier income year; and (c) the trigger benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; and (2) The Commissioner cannot amend an assessment on the basis that a superannuation benefit paid to the person is a superannuation income stream benefit because of the amendments made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 if: (iii) the superannuation benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (a) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (b) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. (1) The Minister may, by legislative instrument, make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions) that: (a) relate to the amendments or repeals made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023; and (2) Without limiting subsection (1), rules made under this section before the end of the period of 12 months starting on the day that Schedule commences may provide that provisions of that Schedule, or any other Act or instrument, have effect with any modifications prescribed by the rules. Those provisions then have effect as if they were so modified. (2) Division 302 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section after another person’s death, because the other person was a member of that fund, in the same way as it would apply if the payments were superannuation death benefits paid to you from a complying superannuation fund. For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if: (b) just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. (2) For the purposes of Subdivision 82‑B of Division 82, Division 302 and section 303‑5 of the Income Tax Assessment Act 1997, the definition of death benefits dependant in section 302‑195 of that Act applies as if paragraphs (a) and (b) of the definition were replaced with the following paragraphs: (a) a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008 or a person who was formerly such a spouse; or (b) a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008, who is aged less than 18. (ii) a superannuation guarantee payment, a small superannuation account payment, an unclaimed money payment, a superannuation co‑contribution benefit payment or a superannuation annuity payment. (2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you at a time in the period: (i) a condition of release specified in item 107A or 207AA of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; or (ii) a condition of release specified in item 109AA of the table in Schedule 2 to the Retirement Savings Accounts Regulations 1997. (1) This section applies to a superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with section 292‑80B. (2) The superannuation benefit is not assessable income and is not exempt income to the extent that it does not exceed the amount mentioned in subsection (3). (3) The amount is the amount of excess non‑concessional contributions stated in the release authority in accordance with paragraph 292‑80A(3)(a), reduced (but not below zero) by the amount of any superannuation benefit that was not assessable income and not exempt income under a previous operation of subsection (2) in relation to the release authority. (4) The superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3). (a) you have an interest in a FIF (within the meaning of Part XI of the Income Tax Assessment Act 1936, as in force just before the commencement of item 37 of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010) (the paying fund); and (b) Subdivision 305‑B of the Income Tax Assessment Act 1997 applies in relation to the paying fund (see section 305‑55 of that Act); and (c) the paying fund transfers an amount to a complying superannuation fund in respect of you during the deduction year; and (d) you choose under section 305‑80 of the Income Tax Assessment Act 1997 that the amount, or part of the amount, is to be treated as assessable income of the complying superannuation fund; and (e) immediately before the transfer happens, there is a post‑FIF abolition surplus (within the meaning of the Income Tax Assessment Act 1936) for the paying fund in relation to you; and For the purposes of the definition of specified roll‑over amount in the Income Tax Assessment Act 1997, treat the taxable component of a directed termination payment (within the meaning of section 82‑10F) as the element untaxed in the fund of a superannuation benefit that is a roll‑over superannuation benefit. (1) This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007. > Note: This section also applies to an income stream replacing an earlier one because of an involuntary roll‑over (see section 307‑127). (2) Despite subsection 307‑125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows: (a) first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007); (b) next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits. The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit. (3) Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened: (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day; (ba) the holder of the superannuation interest is aged 60 or above on 1 July 2007, if none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day. (a) treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and (b) work out the tax free component of the superannuation interest for the purposes of section 307‑125 of the Income Tax Assessment Act 1997 under subsections (6) and (6A). (i) an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and (ii) the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time; (b) next, work out the unused undeducted purchase price (within the meaning of paragraph (a) of the definition of that term in subsection 27A(1) of the Income Tax Assessment Act 1936 just before the commencement of this section, and disregarding paragraphs (b) and (c) of that definition) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007; (c) next, work out the pre‑July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this section) of the eligible termination payment. (a) at least one superannuation income stream benefit was paid from the superannuation income stream before 1 July 1994; or (b) section 27AAAA of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007) applied to the superannuation income stream just before 1 July 2007; (7) For the purposes of paragraph (6)(c), disregard the value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment. (8) If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as: (b) if 1 or more other events mentioned in subsection (3) happened before the commutation—the time just before the earliest of those events happens. (a) references in that section to the later income stream (in relation to a time, or event happening, before the payment of that involuntary roll‑over superannuation benefit) include references to the earlier income stream; and (b) references in that section to the superannuation interest supporting the later income stream (in relation to a time, or event happening, before the payment of that benefit) include references to the earlier interest. (1) This section applies for the purposes of working out the amount of your total superannuation balance just before 1 July 2017. (2) The transfer balance mentioned in paragraph 307‑230(1)(b) of the Income Tax Assessment Act 1997 just before 1 July 2017 is taken to be equal to: (a) the sum of the transfer balance credits (if any) in your transfer balance account just after the start of 1 July 2017; less (b) the sum of the transfer balance debits (if any) arising in your transfer balance account on 1 July 2017 under item 4 of the table in subsection 294‑80(1) of that Act (about payment splits). (1) Section 307‑231 of the Income Tax Assessment Act 1997 applies in relation to borrowings that arise under contracts entered into on or after 1 July 2018. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2018 is treated as if it arose under a contract entered into before 1 July 2018 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) treat a deduction made under former section 279 of the Income Tax Assessment Act 1936 as having been made under section 295‑465 of the Income Tax Assessment Act 1997 instead; and (b) treat a deduction made under former section 279B of the Income Tax Assessment Act 1936 as having been made under section 295‑470 of the Income Tax Assessment Act 1997 instead. If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007‑2008 income year is, despite subsection 307‑345(1), the total of: (b) the amount by which $140,000 exceeds the upper limit for the 2006‑2007 income year (worked out under section 159SG of that Act). Division 316 of the Income Tax Assessment Act 1997 applies in relation to demutualisations occurring on or after 1 July 2008. If: (a) any assets held by the benefit funds of a life insurance company that is a friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a complying superannuation fund; and (b) the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer; the transfer is disregarded for any purposes of the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936. (1) In working out the amount that a life insurance company can deduct, in respect of life insurance policies that are disability policies (other than continuous disability policies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income. (2) In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection (1) applies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company’s liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320‑85(4) of that Act. If: (2) If the life insurance company wishes to include a part of an approved asset in its virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑87(2) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society establishes a virtual PST in the 2000‑01 income year, the calculation of the transfer values of the company’s virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year. (1) Subsection (3) applies for the purposes of subparagraph (b)(i) of the definition of virtual PST life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 259 of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007. (2) Subsection (3) also applies for the purposes of subparagraph (b)(i) of the definition of complying superannuation/FHSA life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 47 of Schedule 7 to the First Home Saver Accounts (Consequential Amendments) Act 2008. (3) Treat an annuity as having been purchased out of a superannuation lump sum or an employment termination payment, if the annuity was purchased: (b) out of an eligible termination payment (within the meaning of the Income Tax Assessment Act 1997, as in force just before the commencement mentioned in subsection (1) of this section). (2) If the life insurance company wishes to include a part of an approved asset in its segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (a) a life insurance company had a liability before 1 July 2000 under a life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and (c) there is a transfer of the company’s assets to the segregated exempt assets to meet that liability or that part of the liability; (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑105(1) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320‑225 of the Income Tax Assessment Act 1997 in the 2000‑01 income year, the calculation of the transfer values of the company’s segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year. Section 322‑25 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Part VC of the Insurance Act 1973 after 17 October 2008. 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you > new Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force after the commencement of this section. > old Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. > STS taxpayer means an STS taxpayer within the meaning of Division 328 of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. #### 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years (1) This section applies for the purpose of working out whether you are a small business entity (other than because of subsection 328‑110(4) of the Income Tax Assessment Act 1997) for the 2007‑08 or 2008‑09 income year. (2) You work out your aggregated turnover for the 2005‑06 or 2006‑07 income year as if the amendments made by Schedule 1 to the Tax Laws Amendment (Small Business) Act 2007 had been in force in relation to that year. (a) your aggregated turnover for the 2005‑06 income year (worked out in accordance with subsection (2)) is $2 million or more; but (b) your STS group turnover for that year (worked out under Subdivision 328‑F of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section) is less than $2 million. (2) The following provisions apply as if you are a small business entity for the income year in which you are winding up the business: #### 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you (1) For the purpose of working out whether you are a small business entity for the 2007‑08, 2008‑09, 2009‑10 or 2010‑11 income year (each a relevant income year) for the purposes of a provision to which subsection (3) applies: (2) An entity (the first entity) controls a discretionary trust for a relevant income year if, for any of the 4 income years (a previous income year) before that year: (a) if the previous income year is before the 2007‑08 income year—the trustee of the trust made a distribution of $100,000 or more to the first entity, any of its affiliates, or the first entity and any of its affiliates; or (i) the trustee of the trust paid to, or applied for the benefit of, the first entity, any of the first entity’s affiliates, or the first entity and any of its affiliates, any of the income or capital of the trust; and (ii) the percentage (the control percentage) of the income or capital paid or applied is at least 40% of the total amount of income or capital paid or applied by the trustee for that year. (1) This section sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (2) This section also sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (3) Any ordinary income that, apart from paragraph 328‑105(1)(a) of the Income Tax Assessment Act 1997 (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have derived before the changeover year (while you were using the STS accounting method) and you have not included in your assessable income because you have not received it is included in your assessable income for the changeover year. (4) Any general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, that, apart from paragraph 328‑105(1)(b) of that Act (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have incurred before the changeover year (while you were using the STS accounting method) and that you have not deducted because you have not paid them can be deducted for the changeover year. (b) for any later income year for which you are a small business entity but only if you used the STS accounting method for the income year before that later year. > Note: Example: You are a small business entity for the 2007‑08 and 2008‑09 income years and you continue to use the STS accounting method for those years. You are not a small business entity for the 2009‑10 income year so you cannot continue to use the STS accounting method for that year. Because you cannot use the STS accounting method for the 2009‑10 income year, you will not be able to use it again for a later income year even if you are a small business entity for that later year. In sections 328‑115 and 328‑120, STS accounting method means the accounting method that was required by the Income Tax Assessment Act 1997 to be used by STS taxpayers for the 2004‑05 income year. (b) you made a choice under subsection 328‑175(3) of old Subdivision 328‑D in relation to a depreciating asset you use to carry on a primary production business and for which you could deduct amounts under Subdivision 40‑F or 40‑G of the Income Tax Assessment Act 1997. (2) In determining whether you can choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997 in an increased access year, disregard subsection 328‑175(10) of that Act. (3) In applying paragraph 328‑175(10)(b) of that Act for the purpose of determining whether you can choose to use that Subdivision in any income year after the increased access years, disregard: (4) Paragraph 328‑180(1)(b) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that paragraph to $1,000: (i) first used the asset, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (i) first used the asset, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (i) first used the asset, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, on or after 1 July 2023 and on or before 30 June 2026. (a) a reference in that paragraph to the end of the income year in which you start to use the asset, or have it installed ready for use, for a taxable purpose were a reference to the earlier of: if: (i) first used the asset, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021. (5) Paragraph 328‑180(2)(a) or (3)(a) of the Income Tax Assessment Act 1997 applies to an amount included in the second element of the cost of an asset as if a reference in that paragraph to $1,000: (5A) For the purposes of determining whether, under subsection 328‑180(2) of the Income Tax Assessment Act 1997, you can deduct, for an income year (the current year), the taxable purpose proportion of an amount included in the second element of the cost of an asset, disregard paragraph (b) of that subsection if: (2) For the purposes of determining whether subsection 328‑180(1) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (b) of that subsection (which sets a limit of $1,000 on the cost of the asset) if, in the period beginning at the 2020 budget time and ending on 30 June 2023, you: (3) For the purposes of determining whether subsection 328‑180(2) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (a) of that subsection (which sets a limit of $1,000 on the amount) if the amount is included in the second element of the cost of the asset at any time in the period beginning at the 2020 budget time and ending on 30 June 2023. (4) In applying paragraph 328‑180(3)(a) of the Income Tax Assessment Act 1997 to an asset, disregard an amount included in the second element of the cost of the asset if the amount is deducted under subsection 328‑180(2) of that Act, as modified by subsection (3) of this section. (5) Section 328‑210 of the Income Tax Assessment Act 1997 applies as if the words “less than $1,000 but” in subsection (1) were disregarded, in relation to a deduction for an income year that ends: Subsection 328‑190(2) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that subsection to 15% were a reference to 57.5% if you are covered by section 40‑125 for the asset (which is about backing business investment). (1) A depreciating asset of yours that had been allocated to your general STS pool is treated as being allocated to your general small business pool. (2) A depreciating asset of yours that had been allocated to your long life STS pool is treated as being allocated to your long life small business pool. (3) If you made a choice, under subsection 328‑185(5) of old Subdivision 328‑D, not to have a depreciating asset allocated to your long life STS pool, the choice has effect for the purposes of subsection 328‑185(5) of new Subdivision 328‑D. (1) This section applies if a depreciating asset of yours is treated as being allocated to your general small business pool or long life small business pool under section 328‑185. (2) The opening pool balance of your general small business pool or long life small business pool for the 2007‑08 income year is taken to be the closing pool balance of your general STS pool or long life STS pool, as the case requires, for the 2006‑07 income year, reduced or increased by any adjustment required under section 328‑225 of new Subdivision 328‑D (about change in the business use of an asset). (a) you were not an STS taxpayer for the 2006‑07 income year (because you stopped being an STS taxpayer before that time); but (b) you are a small business entity for the 2007‑08 income year or a later income year and you choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets for that income year; the opening pool balance of your general small business pool or long life small business pool includes the sum of the taxable purpose proportions of the adjustable values of depreciating assets allocated to the pool under subsection 328‑185(3) of new Subdivision 328‑D for that year. (1) This section applies for the purposes of applying Subdivision 328‑D of the Income Tax Assessment Act 1997 for the 2012‑13 income year and later income years. (2) A depreciating asset that had been allocated to your long life small business pool is treated as being allocated to your general small business pool. (a) the closing pool balance of your general small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under section 328‑225 of that Act; and (b) the closing pool balance of your long life small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under that section. (1) This section applies if you chose to stop being an STS taxpayer for the 2005‑06 income year or the 2006‑07 income year. (2) You cannot choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets until at least 5 years after the income year for which you chose to stop being an STS taxpayer. > Note: Subdivision 328‑D of the Income Tax Assessment Act 1997 continues to apply to depreciating assets that have been allocated to your small business pools even if you are not a small business entity, or do not choose to use that Subdivision, for an income year: see section 328‑220 of that Subdivision. (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct 20% of particular expenditure for your 2023‑24 income year if: (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (d) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑450 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (6) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (ii) if the provider is a registered body of a kind listed in paragraph (2)(b), (c) or (d)—the training is within the provider’s scope of registration for that kind of registered body; and (d) each enrolment, or arrangement, for the provision of the training is made or entered into at or after 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022; and > Note: Paragraphs (b) and (c) mean this section will not apply to expenditure for on‑the‑job training or training provided by you in house. (a) a registered higher education provider (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); (b) a NVR registered training organisation (within the meaning of the National Vocational Education and Training Regulator Act 2011); (c) a registered education and training organisation (within the meaning of the Education and Training Reform Act 2006 (Vic.)); (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct for your 2023‑24 income year an amount that is equal to the sum of: (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (3) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑460 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (4) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (b) you incur the expenditure in the period starting at 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022 and ending at the end of: (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (4) For the purposes of paragraphs (1)(c) and (2)(c), in working out whether you can deduct an amount of expenditure on a depreciating asset, assume that: (b) throughout that effective life, you will use the asset for a taxable purpose to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose. (a) 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑470(1) or (3) applies in relation to the income year; and > Note: The deduction relates to the period of 1 July 2023 to 30 June 2024. An entity may have deducted an amount under paragraph (a) for a previous income year if the entity has a substituted accounting period. (2) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑470 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (3) Sections 8‑10, 40‑215 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (c) you start to use the asset, or have it installed ready for use, for any purpose after 30 June 2023 but before 1 July 2024; and (d) you start to use the asset, or have it installed ready for use, for a taxable purpose at a time (the start time) that is: (e) you are a small business entity, or an entity covered by subsection (4), for the income year that includes the start time; and (h) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) a new reasonably comparable depreciating asset that uses a fossil fuel (other than a use of which that is merely incidental) is available in the market at the start time; (ii) if the asset is being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than the other asset; (iii) if the asset is not being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than a new reasonably comparable depreciating asset that is available in the market at the start time; or (i) a depreciating asset (other than an asset excluded under subsection (6)) that uses electricity, or energy that is generated from a renewable source, to be more energy efficient; (iv) the use of electricity, or energy that is generated from a renewable source, by another depreciating asset to be monitored. (a) the amount is included in the second element of a depreciating asset’s cost under paragraph 40‑190(2)(a) of the Income Tax Assessment Act 1997; and (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (d) you are a small business entity, or an entity covered by subsection (4), for the income year in which the expenditure is incurred; and (i) if the asset could use a fossil fuel (other than a use of which that is merely incidental)—the asset to only use electricity, or energy that is generated from a renewable source; (ii) if the asset uses electricity, or energy that is generated from a renewable source—the asset to be more energy efficient; (g) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) For the purposes of paragraph (1)(b) or (3)(b), in working out whether you can deduct an amount of expenditure assume that: (i) for the purposes of paragraph (1)(b)—to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose; or (ii) for the purposes of paragraph (3)(b)—to the same extent as you use it for a taxable purpose in the income year in which the expenditure is incurred. (b) expenditure (other than expenditure referred to in subparagraph (3)(e)(i)) on an asset that can use a fossil fuel (other than a use of which that is merely incidental); (c) an asset that solely or predominantly generates electricity from a renewable source (for example, photovoltaic cells) or expenditure on such an asset; (d) an asset, or expenditure, being capital works for which you can deduct an amount under Division 43 of the Income Tax Assessment Act 1997; > Note: Subsections (1) and (3) also do not apply to an item of trading stock because such an asset is not a depreciating asset: see section 40‑30 of the Income Tax Assessment Act 1997. A reference in each of the following provisions of the Income Tax Assessment Act 1997 to a registration under section 27A of the Industry Research and Development Act 1986 includes a reference to a registration under former section 39J of that Act: (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) the R&D entity cannot deduct an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from: (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D entity could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:22pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the R&D entity is taken to be able to deduct under subsection 355‑315(2) of the new Act that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the R&D entity’s assessable income for the event year under subsection 355‑315(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 for the asset, the R&D entity is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑446 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the R&D entity is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑465 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: Section 355‑315 of the new Act would otherwise apply for the event in a case where the R&D entity had new law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by an R&D partnership; and (i) the partner can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the partner chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D partnership could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the partner is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:21.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D entity</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D partnership</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the partner is taken to be able to deduct under subsection 355‑525(2) of the new Act the partner’s proportion of that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the partner’s assessable income for the event year under subsection 355‑525(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partner’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if one or more partners (including the partner) in the R&D partnership is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset, the partner is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑448 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the partner is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑467 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s deductions under section 355‑520 of the new Act mentioned in subsection (4A) of this section. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the partner for the event, do so apply to the partner for the event. > Note 1: Section 355‑525 of the new Act would otherwise apply for the event in a case where the partner had new law deductions. Item 7 of the table in subsection 57‑110(2) in Schedule 2D to the Income Tax Assessment Act 1936 applies as if the deduction rules set out in the final column of that item also included former sections 73BA and 73BH of the Income Tax Assessment Act 1936. For the purposes of step 1 of the method statement in subsection 355‑415(2) of the Income Tax Assessment Act 1997, also disregard amounts that have already been taken into account under former subsection 73B(14AA) of the Income Tax Assessment Act 1936 for the R&D entity, the grouped entity and the R&D activities for an earlier income year. (1) This section applies if, apart from former paragraph 73B(10)(a) of the Income Tax Assessment Act 1936, an eligible company could deduct advance R and D expenditure in one or more income years commencing on or after 1 July 2011. > Note: That deduction would be under former section 73B of that Act as that former section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (a) apart from Subdivision H (prepaid expenditure) of Division 3 of Part III of the Income Tax Assessment Act 1936, an eligible company can deduct an amount under former section 73B, 73BA, 73BH, 73QA, 73QB or 73Y of that Act for an income year commencing before 1 July 2011; and (c) apart from former paragraph 73B(10)(a) of that Act, the eligible company could deduct an amount, as a result of that application of that Subdivision, for an income year commencing on or after 1 July 2011. > Note: That deduction would be under that Act as it applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (3) Former paragraph 73B(10)(a) of that Act is taken to apply to those income years commencing on or after 1 July 2011 as if the reference in that former paragraph to section 39J of the Industry Research and Development Act 1986 were a reference to section 27A of that Act. (4) An expression used in this section that is also used in former section 73B of the Income Tax Assessment Act 1936 has the same meaning in this section as it has in that former section. This Subdivision applies to core technology (within the meaning of former section 73B of the Income Tax Assessment Act 1936) if: (a) you incurred core technology expenditure (within the meaning of that former section) in an income year commencing before 1 July 2011 in relation to the core technology under one or more contracts entered into at or after the time referred to in former subsection 73B(12) of that Act; and (b) that expenditure (the undeducted expenditure) cannot be deducted for the last income year commencing before 1 July 2011. (1) This section applies for the purposes of Division 40 of the Income Tax Assessment Act 1997, other than sections 40‑292 and 40‑293 of that Act, if the core technology (the asset) is a depreciating asset. (2) Disregard this section, including its effect on the amount you can deduct under section 40‑25 of that Act for the asset, for the purposes of working out: (3) The asset’s opening adjustable value for the first income year that commences on or after 1 July 2011 (the first new income year) is equal to the amount of the undeducted expenditure. (4) Subsection 40‑75(2) of the Income Tax Assessment Act 1997 applies to the asset as if the first new income year were a change year (within the meaning of that subsection). If the core technology is not a depreciating asset, you can deduct the undeducted expenditure in equal proportions over a period of 5 income years starting in the first income year commencing on or after 1 July 2011. To work out the film component (if any) of your tax loss for the 1997‑98 income year or a later income year, apply former section 375‑805 of the Income Tax Assessment Act 1997. If you incurred a film loss for the purposes of former section 79F (Film losses of 1989‑90 to 1996‑97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989‑90 to 1996‑97 income years, that film loss is the film component of your tax loss for that income year. (1) To work out your film loss (if any) for the purposes of the Income Tax Assessment Act 1997 for the 1989‑90 or a later income year, apply former section 375‑810 of that Act. (2) You can deduct in the 1997‑98 or a later income year your film loss for any of the 1989‑90 to 1996‑97 income years only to the extent that it has not already been deducted. (1) Division 392 of the Income Tax Assessment Act 1997 applies to assessments for the 1998‑99 income year and later income years. (a) it had applied to your assessment for each income year before the 1998‑99 income year for which Division 16 of Part III of the Income Tax Assessment Act 1936 applied in relation to your income; and (b) you had carried on a primary production business during each income year before the 1998‑99 income year when you carried on a business of primary production; and (c) for each income year before the 1998‑99 income year you had a basic taxable income equal to your taxable income for the income year for the purposes of Division 16 of Part III of the Income Tax Assessment Act 1936. > Note: Section 149A of the Income Tax Assessment Act 1936 identifies what your taxable income for an income year is for the purposes of Division 16 of Part III of that Act. Division 392 of the Income Tax Assessment Act 1997 does not apply to your assessment for the 1998‑99 income year or a later income year if you made an election under section 158A (Election that Division not apply) of the Income Tax Assessment Act 1936 relating to an income year before the 1998‑99 income year. 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 A reference in Division 393 of the Income Tax Assessment Act 1997 to a deduction under section 393‑5 of that Act for making a farm management deposit is taken to include a reference to a deduction under section 393‑10 in Schedule 2G to the Income Tax Assessment Act 1936, as in force just before the commencement of this section, if the deposit was made before the 2010‑11 income year. #### 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 (b) the deposit was made with an FMD provider as a result of a request to which section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, applied; the unrecouped FMD deduction in respect of the deposit at that time is equal to the amount of the unrecouped deduction (within the meaning of the former subsection 159GA(3) of the Income Tax Assessment Act 1936) in respect of the deposit immediately before it ceased to be a deposit under the Loan (Income Equalization Deposits) Act 1976. > Note: This means that the unrecouped deduction relating to the deposit under the Loan (Income Equalization Deposits) Act 1976 continues to apply (by becoming an unrecouped FMD deduction) when the deposit is transferred to an FMD provider as a farm management deposit. The Loan (Income Equalization Deposits) Act 1976 was repealed on 22 February 2005. If a beneficiary of a trust was covered by paragraph (c) of the definition of primary producer in section 393‑25 in Schedule 2G to the Income Tax Assessment Act 1936 in the 2009‑10 income year, treat subsection 393‑25(3) of the Income Tax Assessment Act 1997 as having applied to the beneficiary for the purpose of determining the maximum number of choices that the trustee may make under subsection 393‑27(2) of that Act for the 2010‑11 income year. (a) a farm management deposit of an owner was unclaimed moneys for the purposes of section 69 of the Banking Act 1959; and (2) For the purpose of subsection 393‑10(1) of the Income Tax Assessment Act, treat the repaid unclaimed moneys as a repayment of the deposit of the owner. (3) To avoid doubt, the payment of unclaimed moneys to the Commonwealth under section 69 of the Banking Act 1959 is not a repayment of the deposit of the owner for the purposes of Division 393 of the Income Tax Assessment Act 1997. 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 #### 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 If a farm management deposit was made with an FMD provider as a result of a request under section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, then: (a) subsections 393‑40(1) to (4) of the Income Tax Assessment Act 1997 apply as if the day the deposit was made was the day on which the deposit was originally made under the Loan (Income Equalization Deposits) Act 1976; and (1) A copyright collecting society to which section 51‑43 of the Income Tax Assessment Act 1997 applies, may elect that, from 1 July 2004, the section apply to all ordinary income, and statutory income, collected or derived by the society on or after 1 July 2004. Division 420 of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division. Subdivision 615‑C of the Income Tax Assessment Act 1997 applies to you with the modifications set out in this Subdivision if you chose to obtain a roll‑over involving \*shares or units that: (b) were your trading stock, or revenue assets, at the time immediately before that disposal, redemption or cancellation. (1) Disregard subparagraph 615‑45(a)(ii), and paragraph 615‑45(b), of the Income Tax Assessment Act 1997 if the roll‑over relates to \*shares that were disposed of, redeemed or cancelled. (2) For each of the \*shares in the interposed company that you acquired in return for those of your shares or units in the original entity that were your \*trading stock at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  (2) For the purpose of calculating any profit or loss on a future disposal, cessation of ownership, or other realisation of a \*share in the interposed company that you acquired in return for those of your shares or units in the original entity that were \*revenue assets at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  Subdivision 620‑A of the Income Tax Assessment Act 1997 applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. (1) Part 3‑90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Act (No. 1) 2002 and amended by: (2) Section 713‑50 of the Income Tax Assessment Act 1997 (about factors to consider in determining destination of distribution by non‑fixed trust) applies for the purposes of this Part in the same way as it applies for the purposes of Part 3‑90 of that Act. ### Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly‑owned subsidiary of the entity (the future head company) that became the head company of the group; or (ii) at some time during that period, the entity was a wholly‑owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (ii) it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (1) If a group is a transitional group, its head company may, subject to subsection (3), choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (3) If the choice is to be made after the end of the period mentioned in paragraph (2)(a) and before the end of the day mentioned in paragraph (2)(b), it cannot be made unless each entity in relation to which the conditions in subsection (5) are satisfied has agreed to it being made. (a) the entity (the leaving entity) ceased to be a subsidiary member of the group before the choice was made (in a subsection (3) case) or before the revocation took place (in a subsection (4) case); and (b) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; and (c) the asset had become that of the head company because that section applied when a chosen transitional entity (whether or not the same entity as the leaving entity) became a subsidiary member. Section 716‑855 applies for the purposes of this Division in the same way as that section applies for the purposes of Part 3‑90 of the Income Tax Assessment Act 1997. is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705‑B of that Act and with this Division. 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity Section 701‑10 (cost to head company of assets of joining entity) and subsection 701‑35(4) (setting value of trading stock at tax‑neutral amount) of the Income Tax Assessment Act 1997 do not apply to the assets of a chosen transitional entity. > Note: The fact that the head company inherits the entity’s history under section 701‑5 of that Act when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time. #### 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities (2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non‑chosen subsidiary) is worked out in a special way. (b) for each sub‑group (see subsection (6)) that exists in relation to the non‑chosen subsidiary—the sub‑group’s notional allocable cost amount (see subsection(5)) for the non‑chosen subsidiary. (4) The head company adjusted allocable amount for the non‑chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if; (b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of head company’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub‑group in relation to the non‑chosen subsidiary. (5) For each sub‑group that exists in relation to the non‑chosen subsidiary, there is a sub‑group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non‑chosen subsidiary if: (a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non‑chosen subsidiary and the entities comprising the sub‑group; and (c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub‑group membership interests (see subsection (6)) in relation to the sub‑group, and any such entity held those membership interests during the period when it actually held them; and (d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of chosen transitional entity’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub‑group. (6) If a chosen transitional entity holds membership interests in a non‑chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non‑chosen subsidiary: (a) the chosen transitional entity and each interposed non‑chosen subsidiary comprise a sub‑group in relation to the non‑chosen subsidiary (unless the non‑chosen subsidiary is included in a sub‑group in relation to another non‑chosen subsidiary); and (i) the membership interests that the chosen transitional entity holds directly in the non‑chosen subsidiary or in any of the interposed non‑chosen subsidiaries; (ii) the membership interests that each interposed non‑chosen subsidiary holds directly in the non‑chosen subsidiary or in any of the other interposed non‑chosen subsidiaries. #### 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities If any provision of the Income Tax Assessment Act 1997 would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply. > Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred. (1) This section has effect for the purposes of applying section 705‑70 (step 2 of allocable cost amount) of the Income Tax Assessment Act 1997 in relation to a transitional entity. (2) In spite of subsection 705‑70(1A) of that Act, if the amount of an accounting liability of the transitional entity would be different when it becomes an accounting liability of the transitional group, that difference is not taken into account in working out the amount of the liability. #### 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different (a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset (the roll‑over asset) for which there was: (ii) roll‑over relief under section 40‑340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and (i) became an asset of the head company when the transitional group came into existence because subsection 701‑1(1) (the single entity rule) of that Act applies; or differs at that time from what it would have been if the act, transaction or event that gave rise to the CGT event had not occurred in relation to the roll‑over asset; then the provisions mentioned in subsection (2) apply as if the act, transaction or event had not occurred in relation to the roll‑over asset. (a) the act, transaction or event mentioned in subsection (1) happened before a demerger and in connection with the demerger; and (b) before the transitional group came into existence, at least one of the following entities ceased to be a member of the demerger group because of the demerger: (i) the originating company in relation to the roll‑over, or the transferor in relation to the roll‑over relief, was a foreign resident; and (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as a transitional foreign‑held subsidiary of the group. #### 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets (1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied. (2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset. (a) the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and (b) former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset. (4) The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group. (6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses. #### 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets (b) just before the transitional group came into existence, the entity that became the head company held a pre‑CGT asset; and (d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre‑CGT asset and is held by the head company only because the entity is taken by subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company. (2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence. #### 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity (1) This section provides for an addition to the step 1 amount for working out under section 711‑20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity) that ceases to be a subsidiary member of the transitional group at a time (the leaving time), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701‑1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount for paragraph</span><span> </span><span>(2)(c)</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">If, because of the circumstances described in paragraphs</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(a) and (b):</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">The amount is:</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:180.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following provisions applied to the entity:</span></p><p class="Tablea"><span>(a) former section</span><span> </span><span>61A of the </span><span style="font-style:italic">Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(b) former Subdivision</span><span> </span><span>57</span><span>‑</span><span>I in Schedule</span><span> </span><span>2D to the</span><span style="font-style:italic"> Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(c) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(4) of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td><td style="width:148.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the amount treated as being the cost of the asset under that provision; and</span></p><p class="Tablea"><span>(b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>2</span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following subsections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span><span> applied to the entity:</span></p><p class="Tablea"><span>(a) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(5);</span></p><p class="Tablea"><span>(b) 58</span><span>‑</span><span>70(3)</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The amount treated as being the cost, or the first element of the cost, of the asset under that subsection</span></p></td></tr></tbody></table> ``` (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997, as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="4" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amounts and provisions for different dates of acquisition</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Date of the acquisition</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Amount</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Provision of Division</span><span style="font-weight:bold"> </span><span style="font-weight:bold">58 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> applying to the acquisition and the working out of the amount</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:76.7pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>160</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>220</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>After 30</span><span> </span><span>June 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>First element of the cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subsection</span><span> </span><span>58</span><span>‑</span><span>70(5)</span></p></td></tr></tbody></table> ``` > Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. > Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and ### Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: #### 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70‑45 to 70‑70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420‑51 to 420‑58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (a) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority‑owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority‑owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority‑owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority‑owned entity became a subsidiary member of the group, there was roll‑over relief under section 40‑340 of the Income Tax Assessment Act 1997. (a) while the asset is, because subsection 701‑1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, its tax cost setting amount is taken to be equal to the continuing majority‑owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711‑30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997. (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset becomes that of an entity (a new asset holder) other than the head company because subsection 701‑1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder) acquiring some or all of the membership interests in the new asset holder; and (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset is acquired by another entity (a new asset holder) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll‑over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value asset just before the acquisition; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 #### 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 (b) members of the consolidated group or the MEC group mentioned in subsection 104‑500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701‑1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701‑1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (3) If this section applies, neither subsection 104‑500(4) nor subsection 104‑500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year. ### Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C‑B); and (b) modifies certain rules in Part 3‑90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C‑C). > Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719‑2 and 719‑10 of this Act). 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership #### 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(ii) of that Act (see subsection 719‑2(3) of this Act). (b) a trust (a non‑resident trust) that does not meet the requirements in any item of the table in section 703‑25 of the Income Tax Assessment Act 1997. (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non‑resident company or a non‑resident trust; or Test entity must be a subsidiary member on assumption that non‑resident companies and non‑resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non‑resident company or non‑resident trust were a subsidiary member of the group. (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv). #### 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(iii) of that Act (see subsection 719‑2(3) of this Act). (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C‑10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3). If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C‑10 are met; and (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (ii) an entity that is a transitional foreign‑held indirect subsidiary of the group because of another application of this paragraph; Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign‑held indirect subsidiary would need to have satisfied the set of requirements in either section 701C‑10 or 701C‑15 (1) This Subdivision applies if an entity (the transitional foreign‑held joining entity) that is a transitional foreign‑held subsidiary or a transitional foreign‑held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time) the group comes into existence. (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign‑held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign‑held indirect subsidiary that becomes a subsidiary member at that time takes account of this. (a) section 701‑10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); apply, for the purposes of setting the tax cost of an asset of the transitional foreign‑held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign‑held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. > Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign‑held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign‑held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign‑held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign‑held subsidiary and the other entity. > Note 2: If the transitional foreign‑held joining entity is a transitional foreign‑held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705‑A of the Income Tax Assessment Act 1997, in its application in accordance with Subdivision 705‑B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company. Subsection 701‑35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax‑neutral amount) does not apply to the assets of the transitional foreign‑held joining entity if it is a transitional foreign‑held subsidiary. Section 701‑15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: (a) this section applies to each membership interest in the transitional foreign‑held subsidiary that is held by an entity (an eligible non‑resident) of a kind mentioned in subparagraph 701C‑20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign‑held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701‑1(2) of the Income Tax Assessment Act 1997 applies to the eligible non‑resident in the same way as it applies to the head company. Section 711‑5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: > Note: If the leaving entity is a transitional foreign‑held subsidiary (within the meaning of section 701C‑20 of the Income Tax (Transitional Provisions) Act 1997), this Division will, in accordance with subsection 701‑15(4) of this Act (see section 701C‑40 of the first‑mentioned Act), apply to membership interests that an eligible non‑resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity. (1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707‑C of the Income Tax Assessment Act 1997. (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period. (1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if: (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (d) the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997. (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: (1) The head company of a consolidated group may make a choice in the approved form to apply section 701D‑10 to another entity. (2) However, the head company cannot make that choice if subsection 701D‑10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (a) an asset of the head company because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701‑55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40‑77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40‑77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40‑285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount. (b) after the asset became an asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). > Note: The final entity will be different from the head company if an entity (the leaving entity) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40‑285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. > Note: The final entity will be entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701‑5 (the entry history rule) of that Act and perhaps also section 701‑40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity) became a subsidiary member of the group; and It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). > Note: In some cases, section 705‑47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40‑285(3) of this Act. If: (b) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and subsection 40‑285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701‑10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997. > Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997. (1) For the purposes of Part 3‑90 of the Income Tax Assessment Act 1997, this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960‑G of that Act whether the interest or right is a membership interest of the entity in the other entity. > Note: Under Subdivision 960‑G of the Income Tax Assessment Act 1997, a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001) apply to transactions in relation to the interest or right at the relevant time. Despite the amendments of section 703‑35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) If an entity (the joining entity) to which section 40‑75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time), this Subdivision applies in relation to: (ii) became assets of the head company of the group at the joining time because of section 701‑1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure. (1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). (2) If the joining entity could not deduct an amount under Subdivision 40‑B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701‑55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40‑35, 40‑37, 40‑40 or 40‑43 treated the joining entity as holding a notional asset. > Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705‑30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. (a) deductions under former Subdivision 330‑A, 330‑C or 330‑H of the Income Tax Assessment Act 1997, or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated an entity as holding because of the expenditure. (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); > Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40‑75(4) of this Act, but may have been reset since under Subdivision 40‑B of the Income Tax Assessment Act 1997. > Note 2: The effective life of a notional asset is specified by whichever one of sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act is relevant to the notional asset. (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (9) Section 705‑55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705‑45 of that Act. > Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705‑40 of the Income Tax Assessment Act 1997. (a) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701‑5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. > Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705‑305(3). (ii) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707‑A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member. 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value #### 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707‑320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor) other than the real loss‑maker mentioned in subsection 707‑315(1) of that Act for the bundle; and (b) both the real loss‑maker and the value donor became members of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (ca) neither the real loss‑maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (ii) a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (ii) section 713‑540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (2) It must have been possible for the real loss‑maker to have transferred the loss to the value donor under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss‑maker at the initial transfer time the amount worked out using the formula:  > Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707‑327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss‑maker to the transferee. > total of real loss‑maker’s non‑foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss‑makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) included in a bundle of losses: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. #### 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value (1) This section affects the calculation of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707‑325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936, in the bundle). > Note: This section does not affect the calculation of the real loss‑maker’s modified market value for other purposes (such as the real loss‑maker being a value donor for the purposes of another application of section 707‑325 of this Act). (3) One condition is that the event was an injection of capital directly into the real loss‑maker by the value donor mentioned in section 707‑325 of this Act. (c) that would have caused subsection 707‑325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss‑maker’s modified market value (even if no other events described in subsection 707‑325(4) of that Act had occurred), apart from this section. (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss‑maker (whether or not the event also involved either the value donor or the real loss‑maker); or (1) This section has effect for the purposes of working out under Subdivision 707‑C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707‑325, as if there were added to the modified market value of the real loss‑maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (c) the loss is not a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707‑A of that Act at the initial transfer time had the company: > Note: This section has effect even if the amount added to the real loss‑maker’s modified market value under section 707‑325 is nil because the value donor’s modified market value is nil. (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707‑325, as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (4) If the transferee mentioned in subsection 707‑325(1) chooses, sections 707‑310, 707‑335 (except paragraph 707‑335(2)(a)) and 707‑340 of the Income Tax Assessment Act 1997 (and subsections 707‑315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: > Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707‑325(1)(d) and (e) and subsection 707‑325(2) in an application of section 707‑325 separate from the application of that section mentioned in paragraph (1)(a) of this section. > Note: This means that a loss that provided a basis for section 707‑325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. (b) in connection with the requirement that it must have been possible for a company (the notional transferor) to transfer to another company (the notional transferee) for an income year a loss under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997. (b) ends immediately after the initial transfer time mentioned in subsection 707‑320(1) of the Income Tax Assessment Act 1997. > Note: For the purposes of identifying the trial year using the definition in section 707‑120 of the Income Tax Assessment Act 1997, the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time. (1) Subsection (3) of this section affects the calculation, under section 707‑325 of the Income Tax Assessment Act 1997 and section 707‑325 of this Act, of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (the formation time) the group became a consolidated group; and (b) the provisions described in subsection 707‑327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707‑327(1)(b) and (c) of this Act as if the bundle included the loss; and (d) subsection 707‑325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707‑325(1) of this Act chooses that this section apply in relation to the real loss‑maker. (2) Section 707‑325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. (3) Disregard for the purposes of subsection 707‑325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707‑325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or > Note: Disregarding such an event could have a direct or indirect effect on the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss‑maker’s modified market value calculated under section 707‑325 of the Income Tax Assessment Act 1997, if the real loss‑maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707‑325 of this Act to add an amount to the real loss‑maker’s modified market value for those purposes. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) that: (b) was transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from an entity other than the real loss‑maker. (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997. Disregard an event that is described in subsection 707‑325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707‑325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004. (1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss‑maker) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time) the transferee became the head company of a consolidated group; and (ii) the conditions in one or more of paragraphs 165‑15(1)(a), (b) and (c) did not exist in relation to the real loss‑maker; and (da) the real loss‑maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non‑transferred losses) of the same sort that the transferee made without a transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non‑transferred losses). (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. <table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Limit on utilising the losses</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For this income year:</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the losses that the transferee may utilise cannot exceed:</span></p></td></tr></thead><tbody><tr><td style="width:20.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:120.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The first income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span style="font-size:8pt; vertical-align:2pt">1</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The second income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) </span><span style="font-size:8pt; vertical-align:2pt">2</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the amount of the losses utilised for the income year mentioned in item</span><span> </span><span>1</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The third income year ending after the initial transfer time, or a later income year</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time</span></p></td></tr></tbody></table> ``` (4) Subdivision 707‑C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707‑A of that Act. > Note: This has 2 effects. First, Subdivision 707‑C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707‑A of that Act). (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). (7) This section does not limit the transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company. In working out when a choice may be made under subsection 707‑325(5), 707‑327(5), 707‑328A(4) or 707‑350(5), ignore losses to which section 713‑535 of the Income Tax Assessment Act 1997 applies. > Note: That section deals with losses transferred under Subdivision 707‑A of that Act from certain wholly‑owned subsidiaries of life insurance companies that are members of a consolidated group. Section 707‑405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act. (1) This section reduces the adjustable value of a notional asset that section 40‑35, 40‑37, 40‑38, 40‑40 or 40‑43 treats the head company of a consolidated group as holding, if: (b) that section treats the leaving entity as holding a notional asset because of section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997. > Note: Section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time. The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences. (1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event) happening involving an entity (the originating entity) and another entity (the recipient entity) if: (a) the event occurs in connection with a life insurance company (the member life insurance company) becoming a member of a consolidated group; and (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest) in a company or in another trust. (a) a life insurance company transfers an asset (also the original asset) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320‑200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset) to its segregated exempt assets where, apart from this Subdivision, section 320‑255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event) is made in connection with the life insurance company (also the member life insurance company) becoming a member of a consolidated group. (1) This Subdivision applies only if the originating entity (for a section 713‑505 case) or the life insurance company (for a section 713‑510 case) chooses that it apply. (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713‑510 of the Income Tax Assessment Act 1997; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713‑510 of the Income Tax Assessment Act 1997; and (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs. This Act, and the Income Tax Assessment Act 1997, apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group. (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain) that the originating entity would have made as a result of the deferral event is disregarded; and (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount) under paragraph 320‑15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (1) This section operates if, after the deferral event happens, another event (the new event) happens where the new event is: (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (i) the original asset being transferred to or from the company’s virtual PST under section 320‑180, 320‑185 or 320‑195 of the Income Tax Assessment Act 1997; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320‑235, 320‑240 or 320‑250 of that Act; or (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. > Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713‑505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (1) For a section 713‑505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713‑535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: (a) an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group at a time (the leaving time); and (b) but for the cessation of membership and section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision. Sections 716‑340 and 716‑345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. <table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:345.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Extended operation of sections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 1</span><br><span style="font-weight:bold">Sections</span><span style="font-weight:bold"> </span><span style="font-weight:bold">716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">340 and 716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">345 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> operate in relation to:</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 2</span><br><span style="font-weight:bold">In the same way as they operate in relation to:</span></p></td></tr></thead><tbody><tr><td style="width:5.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:161.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>46</span><span>‑</span><span>90 of that Act</span></p></td><td style="width:156.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>40</span><span>‑</span><span>455 of that Act</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software pool created under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure allocated to a software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Software, expenditure on which was in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>In</span><span>‑</span><span>house software, expenditure on the development of which is allocated to a software development pool</span></p></td></tr></tbody></table> ``` (1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: Section 703‑30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004. (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time) a wholly‑owned subsidiary of the entity that became the head company of the group (the head entity), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier‑1 company of the group at the formation time. Despite the amendment of section 719‑30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) Section 719‑160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719‑160(3) of the Income Tax Assessment Act 1997. (3) However, that effect of section 719‑160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division. (2) Paragraphs 701‑1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier‑1 company at the time the MEC group came into existence. (a) the entity and one or more other entities were members of a potential MEC group as eligible tier‑1 companies, throughout the period: (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier‑1 company, at the time the transitional group came into existence. To avoid doubt, sections 707‑325 and 707‑327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719‑305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707‑A of that Act. Subsection 719‑325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006. (1) A reference in an agreement to item 25 of the table in subsection 721‑10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: (1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: Division 725 applies to a scheme entered into on or after 1 July 2002. It also applies to a scheme entered into on or after 27 June 2002, but only if: ### Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (1) Division 727, as inserted by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 and amended by the New Business Tax System (Consolidation and Other Measures) Act 2003, applies to a scheme entered into on or after 1 July 2002. (b) a presumed indirect value shift that happens under the scheme and affects a realisation event that happens on or after 1 July 2002. (a) the economic benefits taken into account in determining that the scheme has resulted in that indirect value shift or presumed indirect value shift include economic benefits provided by: > Note: In that case, the consequences of the trigger event are worked out under Division 138 or 139 of the Income Tax Assessment Act 1997: see items 13 and 14 of Schedule 15 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002. (1) An indirect value shift does not have consequences under Division 727 of the Income Tax Assessment Act 1997 if, to the extent of at least 95% of their total market value, the greater benefits consist entirely of: (a) a right to have services that are covered by section 727‑240 of that Act provided directly by the losing entity to the gaining entity; or (d) if the losing entity’s 2002‑2003 income year ends before 30 June 2003—the start of the losing entity’s 2004‑2005 income year. (2) For the purposes of section 727‑850 (about a presumed indirect value shift affecting a realisation event) of the Income Tax Assessment Act 1997, subsection (1) of this section applies to the presumed indirect value shift: #### 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (2) Paragraph 727‑470(2)(a) of the Income Tax Assessment Act 1997 (as in force immediately before the commencement of this section) continues to have effect in relation to the indirect value shift as if the repeals and amendments made by Schedule 1, Parts 1 and 2 of Schedule 3 and Schedule 8 to the Tax Laws Amendment (Small Business) Act 2007 had not been made. ## 701C‑25 Application and object of this S 701C‑25 Application and object of this Subdivision (1) This Subdivision applies if an entity (the transitional foreign‑held joining entity) that is a transitional foreign‑held subsidiary or a transitional foreign‑held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time) the group comes into existence. (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign‑held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign‑held indirect subsidiary that becomes a subsidiary member at that time takes account of this. ## Basic modification Basic modification (a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and (2) Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001 (the new Act) applies to the plant on this basis: (a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant’s opening adjustable value; and (b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and (c) if you excluded an amount from your assessable income under section 42‑290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999—the cost of the plant, and its opening adjustable value, are reduced by that amount; and (d) if subparagraph (1)(b)(ii) applies to you—you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi‑owner of the plant under the former Act continue. (3) If you were using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis: (a) for the diminishing value method—replace the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate you were using; and (i) replace the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate you were using; and (ii) increase the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note 1: Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced. > Note 2: Small business entities can choose to work out the decline in value of their depreciating assets under Division 328. (a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or (3) If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40‑70(1) or 40‑75(1) of the new Act that includes the plant’s effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and (2) For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets. (3) For a case where the plant is merged into another depreciating asset, section 40‑125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it. (b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and (a) you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and (b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU’s opening adjustable value. (1) Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001. (2) For a unit of software for which you were deducting amounts under Subdivision 46‑B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis: (d) you must use the same effective life you were using under Subdivision 46‑B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001. (1) This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day. (b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and (c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and (1) This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001. > Note: Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8). (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330‑80 of the former Act for your income year ending on 30 June 2001; and (c) in applying the formula in section 40‑75 of the new Act for the income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The remaining effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these: (i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and (ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (7) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and (b) the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of expenditure incurred in carrying on eligible quarrying operations—the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (i) you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day) after 30 June 2001; or (ii) the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day) after 30 June 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which the start day occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year. there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (1) This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330‑H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and (c) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (i) any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset); (i) any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (4) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (4) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (b) the expenditure would have been transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330‑H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for your income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (1) Despite subsections 40‑35(5), 40‑38(5) and 40‑40(4), there is no additional decline in the value of the notional asset referred to in those subsections if: (a) apart from this section, subsection 40‑35(5), 40‑38(5) or 40‑40(4) would apply because the real asset referred to in that subsection is disposed of; and (a) at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373‑35 of the former Act; and (b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day. (a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and (1) Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time). (2) Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time. (a) you have deducted or can deduct an amount under Subdivision 387‑G of the former Act for an amount (the qualifying amount) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and (b) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and (1) This section applies to you if you have deducted or can deduct an amount under Subdivision 400‑A of the former Act for an amount (the qualifying amount) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400‑A of the former Act. (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and (c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400‑15(3) of the former Act; and (1) Units of plant that you had allocated to a pool under Subdivision 42‑L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act. (a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and (c) in applying the formula in section 40‑70 of the new Act for your income year in which 1 July 2001 occurs—it has a base value equal to that opening adjustable value; and (d) you replace the component in the formula in subsection 40‑70(1) of the new Act that includes an asset’s effective life with the pool percentage you were using for the pool; and (e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40‑115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and (f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset. (3) An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item). > Note 1: You work out the decline in value of an item removed under this subsection under Subdivision 40‑B of the new Act, using the cost for it worked out under section 40‑205 of the new Act. (b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset. (2) The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year) in this way: (a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and (b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section. (a) for a unit of plant (including IRUs and expenditure on software that is not pooled)—its undeducted cost at the end of 30 June 2001; or (b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence—the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or (c) for transport capital expenditure—the entity’s amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or (d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (e) for expenditure on evaluating the impact on the environment of a project—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (f) for assets that were pooled under Subdivision 42‑M or 42‑L of the former Act—the closing balance of the pool at the end of 30 June 2001. (4) The asset’s base value for applying the formula in section 40‑70 of the new Act for the diminishing value method is that opening adjustable value. (5) The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an item of plant for which you were using the prime cost method—using the rules in section 40‑10 of this Act; and (c) for a unit of software for which the entity was deducting amounts under Subdivision 46‑B of the former Act—using the rules in subsection 40‑25(2) of this Act; and (f) for an amount of expenditure on evaluating the impact on the environment of a project—using the rules in section 40‑55 of this Act. (6) The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an amount of unrecouped expenditure under Division 330 of the former Act—using the rules in section 40‑35 of this Act; and (b) for an amount of transport capital expenditure under Division 330 of the former Act—using the rules in section 40‑40 of this Act; and (7) The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act. (a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑C of the former Act; or (b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑H of the former Act; or (c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387‑B of the former Act; or (d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; or (e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365. (9) The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001. (10) You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount). (11) You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount. (1) Subsections 40‑65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened: (b) you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act. (a) paragraph 40‑65(6)(a) of the Income Tax Assessment Act 1997 included both events set out in subsection (1) of this section; and (b) subsections 40‑65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events. (1) A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936. (2) An amount you have deducted or can deduct for a water facility under Subdivision 387‑B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40‑F of the new Act. (3) A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936. (a) you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40‑115 (about splitting a depreciating asset) or 40‑125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and (b) it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40‑72 of that Act; (2) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if: (c) it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40‑72 of that Act. (3) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset) before 10 May 2006 if: (b) the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and (d) it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40‑72 of that Act. (a) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you: (b) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001. (2) If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act. (3) Otherwise, Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section. (a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or (b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or (ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life. (1) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001. > Note: If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40\. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997. (1A) Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001. (1B) Subsection (1) applies to a mining, quarrying or prospecting right (the new right) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if: (i) the other company is a member of the same wholly‑owned group as the original holder and was a member of that group just before that day; and (ii) the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer. (1D) Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if: (b) the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001. (a) you acquired, under an interest realignment arrangement, an interest (a new interest) in a mining, quarrying or prospecting right; and (b) the interest was acquired in exchange for one or more other interests (old interests) in other mining, quarrying or prospecting rights; and Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001. (a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or (b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership; the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act. (3) An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that: (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act. (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act. (6) Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243. (7) An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if: (a) you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and (8) The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section. (c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act. (2) Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001. A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act. if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011. (2) The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011. (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset for an income year is the amount worked out under section 40‑130 if: (a) the income year is the year in which you start to use the asset, or have it installed ready for use, for a taxable purpose; and (b) subsection (2) (about businesses with turnover less than $500 million) applies to you for the year and for the income year in which you started to hold the asset (if that was an earlier year); and > Note 1: An effect of paragraph (1)(a) is that this Subdivision only applies to one income year per asset. See also subsection 40‑135(1). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $500 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. Exception—assets for which the decline in value is worked out under section 40‑82 or Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (3) However, this section does not apply to a depreciating asset for an income year if you work out the decline in value of the asset for the income year under any of the following: (1) For the purposes of paragraph 40‑120(1)(c) and section 328‑182, you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you: > Note: Section 328‑182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997. (i) entering into a contract under which you hold the post‑12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑12 March 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post‑12 March 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (8) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (9) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (10) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (1) For the purposes of section 40‑120, the decline in value for the income year in which paragraph 40‑120(1)(a) is satisfied (the current year) is: > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 12 March 2020 to 30 June 2020 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2020 to 30 June 2021. (a) 50% of the asset’s cost as at the end of the current year, disregarding any amount included in the second element of the asset’s cost after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997, assuming its cost were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (3) However, the amount worked out under subsection (2) for an income year cannot be more than the amount that is the asset’s cost for the year. (a) 50% of the sum of the asset’s opening adjustable value for the current year and any amount included in the second element of its cost for that year, disregarding any amount included in that second element after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997 assuming: (ii) for the prime cost method—the component “Asset’s \*cost” in the formula in subsection 40‑75(1) of that Act (as adjusted under that section) were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (b) for the prime cost method—the sum of its opening adjustable value for the income year and any amount included in the second element of its cost for that year. (1) The decline in value of a depreciating asset is not worked out under this Subdivision for an income year if this Subdivision already applied in working out the decline in value of the asset for an income year. (2) For an income year later than the year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (3) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (4) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) You may choose that the decline in value of a particular depreciating asset for an income year, and subsequent income years, is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the first income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. If this Subdivision applies to work out the decline in value of a depreciating asset you hold for an income year, no other provision of this Act or the Income Tax Assessment Act 1997 applies to work out that decline in value. (1) For the purposes of this Subdivision, you are covered by this section for a depreciating asset if, on or before 30 June 2023: (2) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (3) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or Exception—assets for which the decline in value is worked out under Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (a) the asset is allocated to a low‑value pool, or expenditure on the asset is allocated to a software development pool (see Subdivision 40‑E of the Income Tax Assessment Act 1997); or (b) you or another taxpayer has deducted or can deduct amounts for the asset under Subdivision 40‑F of the Income Tax Assessment Act 1997 (about primary production depreciating assets). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $5 billion; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this section. (ii) if the 2019‑20 income year ends on or before 6 October 2020—the sum of your ordinary income (if any) and statutory income (if any) for the 2019‑20 income year; and (c) the sum of the amounts worked out under subsection (3) for the 2016‑17, 2017‑18 and 2018‑19 income years exceeds $100 million. (b) next, work out the cost of each of those assets (including any amounts included in the second element of the asset’s cost at a time that is in the income year); (4) For the purposes of subsection (3), disregard an asset if, at the time you first used the asset, or had it installed ready for use, for a taxable purpose: (a) it was not reasonable to conclude that you would use the asset principally in Australia for the principal purpose of carrying on a business; or (5) For the purposes of paragraph (3)(b), to work out the cost of a depreciating asset that is capital works (see section 43‑20 of the Income Tax Assessment Act 1997): (a) disregard section 40‑45 of that Act and work out the cost of the capital works using Subdivision 40‑C of that Act; and (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under subsection (3) if: (a) where section 40‑155 covers you for the current year (regardless whether section 40‑157 also covers you for the current year)—an exclusion applies to you and the asset for the current year under section 40‑165 (about exclusions for businesses with turnover of $50 million or more); or (ii) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s start time occurs in the current year—the asset’s cost as at the end of the current year, disregarding any amount included in the asset’s cost after 30 June 2023; or (b) if the asset’s start time occurred in an earlier year—the sum of its opening adjustable value for the current year and any amount included in the second element of its cost for the current year, disregarding any amount included in the asset’s cost after 30 June 2023. > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 6 October 2020 to 30 June 2021 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2021 to 30 June 2022. (a) where paragraph 40‑160(2)(a) applies—section 40‑155 would not cover you for the income year if the reference in that section to $5 billion were instead a reference to $50 million; and (i) entering into a contract under which you hold the post‑6 October 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑6 October 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of satisfying paragraph 40‑160(1)(a) for the post‑6 October 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you already satisfied paragraph 40‑160(1)(a) of this Act for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (9) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (1) For the purposes of subsections 40‑160(2) and 40‑170(1A), an exclusion applies to you and an asset for an income year if any of the exclusions in this section applies in relation to the asset. (4) This exclusion applies in relation to the asset if the asset is available for use, at any time in the income year, by any of the following: (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under this section if: (ii) you started to use the asset, or have it installed ready for use, for a taxable purpose in an earlier income year; and (b) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under section 40‑82 of the Income Tax Assessment Act 1997—the amount worked out under subsection (3); or (b) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under Subdivision 40‑BA of this Act—the amount worked out under subsection (4); or Assets affected by section 40‑82 of the Income Tax Assessment Act 1997 (about assets costing less than $150,000, medium sized businesses) (a) the amount that would be the asset’s decline in value for the year under section 40‑82 of the Income Tax Assessment Act 1997, assuming the reference in subparagraph 40‑82(3A)(b)(ii) of that Act to 31 December 2020 were instead a reference to the 2020 budget time; and (a) the amount that would be worked out under paragraph 40‑130(2)(a) or (4)(a) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(a) and (4)(a) to 30 June 2021 were instead references to the 2020 budget time; and (c) the amount that would be worked out under paragraph 40‑130(2)(b) or (4)(b) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(b) and (4)(b) to “the amount worked out under paragraph (a)” were instead references to “the amounts worked out under paragraphs 40‑170(4)(a) and (b)”. (a) the amount that would be the asset’s decline in value for the year under Division 40 of the Income Tax Assessment Act 1997, disregarding any amounts included in the eligible second element worked out under section 40‑175 of this Act for the asset for the year; and The amount worked out under this section (the eligible second element) for a depreciating asset for an income year is the sum of any amounts included in the second element of the asset’s cost at a time that is in both of the following periods: (1) For an income year later than a year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (2) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (3) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) This section applies if the decline in value for a depreciating asset for an income year is worked out under this Subdivision, and at a time (the balancing adjustment time) in a later income year: (i) it becomes not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (b) none of the requirements in paragraphs 40‑295(1)(a), (b) or (c) of the Income Tax Assessment Act 1997 are satisfied in relation to the asset. (2) For the purposes of Subdivision 40‑D of the Income Tax Assessment Act 1997 assume that, at the balancing adjustment time, you stop using the asset, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again. (3) For the purposes of section 40‑180 of the Income Tax Assessment Act 1997 assume that the reference in item 3 of the table in subsection 40‑180(2) of that Act to “because you stop using it for any purpose expecting never to use it again” were instead a reference to “because of section 40‑185 of the Income Tax (Transitional Provisions) Act 1997”. (4) If a balancing adjustment event happens to a depreciating asset you hold because of this section, this Subdivision cannot apply to work out the decline in value of the asset for a later income year. (1) You may choose that the decline in value of a particular depreciating asset for an income year is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year. (1) Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40. (a) you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset: (ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and (4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day. (5) The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if: (i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or (ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and  > sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose. (7) Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens: (a) if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b). (i) an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and (ii) the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and (3) The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount. (a) on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and (c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and (ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal; (2) There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal. (3) Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount. If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997. (a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and (b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and: (i) the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, the R&D entity is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—a clawback amount under section 355‑447 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑466 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. (b) section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions. > Note 2: The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and: (i) the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset; (ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, an R&D entity (the partner) that is a partner in the R&D partnership and is entitled to one or more new law deductions for one or more income years for the asset, is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—a clawback amount under section 355‑449 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑468 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s new law deductions mentioned in paragraph (2)(b) of this section. (4) Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event. > Note: Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions. (1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant. (b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and (3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it. (a) there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and (b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act. (2) The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor. (3) The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and <table cellspacing="0" cellpadding="0" style="width:364.2pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:353.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading" style="page-break-inside:avoid"><span>Conditions for small business taxpayers retaining accelerated rates</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Condition</span></p></td></tr></thead><tbody><tr><td style="width:21.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:321.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>The transferee must have been a small business taxpayer for the income year (the </span><span style="font-weight:bold; font-style:italic">start year</span><span>) that includes the time when the entity first used the plant, or first had it installed ready for use.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>2</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>At that time, neither of these applies:</span></p><p class="Tablea"><span>(a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;</span></p><p class="Tablea"><span>(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection</span><span> </span><span>(5).</span></p></td></tr></tbody></table> ``` (4) For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership. (5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement. (a) for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or (i) replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and (ii) increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).  (b) if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11). (c) that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and (d) that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and (e) that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity. (a) for taxable supplies (if any) the entity makes during the year in the course of carrying on a business—the value (as defined by section 9‑75 of the GST Act) of the supplies; and (b) for other supplies the entity makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies. (1) The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for: (a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (c) for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or (d) for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant. (3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115. (4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain. (5) Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee. (i) the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or (a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and (1) A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act. (2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year. For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if: Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act. (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset): and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply. (i) for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or (ii) for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and (c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act. (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and (2) Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act. The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under: (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on: (2) You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act. (3) A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under: (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and (2) Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act. A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act. The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001. If: (d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act; (a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and (a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and (b) the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and (c) paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997. Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years. (1) For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section. (b) the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (b) that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (1) There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea" style="page-break-after:avoid"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a); and</span></p><p class="Tablea" style="page-break-after:avoid"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (b) disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (f) an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division. (4) If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45‑5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest. (5) If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45‑10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest. Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Disregard the use of the following amounts in determining (for the purposes of Subdivision 50‑A of the Income Tax Assessment Act 1997 whether a fund established before 1 July 1997 operates and pursues its purposes in Australia: Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years. (2) However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date. Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if: (b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time. Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years. 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years (1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act. <table cellspacing="0" cellpadding="0" style="margin-left:56.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:258.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Application provisions for specific sections</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-size:9pt; font-weight:bold">Item</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">This section of the </span><span style="font-size:9pt; font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-size:9pt; font-weight:bold"> ...</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">Applies as described in this provision of this Act ...</span></p></td></tr></thead><tbody><tr><td style="width:24.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55(1)</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>95</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>8</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td></tr></tbody></table> ``` (a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and (b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997. > Note: Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year. (b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997; sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997). > Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock. (3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997. (a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and (b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936; > Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal. #### 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997. (1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year. (2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936. (3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year: (a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners; (b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed. > Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year. > Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year. (b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year; the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year. (2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. (3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2). #### 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997. #### 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business (1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. (2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity. > Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997. (1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. (2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value. > Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997. #### 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year. (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. > Note: Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. > Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given). (5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act). (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment. > Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%. (5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%. (6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.  > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section. (b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4). Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age. Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later. Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies. Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3. (4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997. (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%. > Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986. (5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D. > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. (a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and (b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year). (3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and (2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual: (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income. > Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F. > Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997. > Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997. #### 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 (1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012. (2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies. (3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act. (b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009. (2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if: (i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest; (iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or (i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest; (iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009. (2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time. (4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2): (a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and (b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being: (ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and (c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and (d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if: (i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or (ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and (e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and (i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and (ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and (g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest. (a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced: (i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or (ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and (b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5. (2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right. (3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right. (2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. (3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section. Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years. (1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision. > Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision). > Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936). > Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997. (a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936. (1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936. (2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997. > Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997. (3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and (d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; (f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time. > Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and (d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015. (a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or (4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if: (b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset. The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year. (a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and (1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied: (b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and (d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works). (3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936. Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936. (b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006. (2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement. > Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement. Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual: (b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her. 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act (1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee). (2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year: (3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection. #### 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997. Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936). (2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if: (a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; (a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011); (b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986. > Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section. If: (a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and (b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936; Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995. (1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997. (2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997. (3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997. (4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997. > Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one. Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year: (a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and (b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year; the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation. Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset. (b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section); > Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply. (1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if: (a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and (2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value. (4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value. (a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997. (2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less. (1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936: (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. (1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if: (2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by: (a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or (a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or (2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period. Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year: If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997. (1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002. (2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset. (3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required. (i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and (ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and (c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and (f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997). (a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or (1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:  > total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part. (a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or (2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section. (3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1). (1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences. > Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997. (c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets). (4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act. (5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act. Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement. (a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and (2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time. (a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and (ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs. (2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer. (a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and (b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest; (2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event. (3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly. (4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly. <table cellspacing="0" cellpadding="0" style="width:362.55pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:351.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Creating a CGT asset</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">CGT event number</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Applicable amount</span></p></td></tr></thead><tbody><tr><td style="width:50.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D1</span></p></td><td style="width:290.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the incidental costs the originating company incurred that relate to the CGT event</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D2</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the option</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D3</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the right</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>F1</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred on the grant, renewal or extension of the lease</span></p></td></tr></tbody></table> ``` (5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day. A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision. (a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996. (b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. (b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend. (3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities. (1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company. (2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred. (3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company. (1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of: (2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of: (3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note. (1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised. (b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and (ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act. You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and (b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996. (c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and (c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over. (3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. (a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and (c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and (d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act. (3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division. Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years. A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: (1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day. (2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice. (a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and (b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and (a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and (b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and (c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group. (5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004. (6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection. (1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss): (b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions); and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time: (i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or (e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and (f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and (ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred; (2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if: (a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these: (i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset; (ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and (3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act. (a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and (b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section. (5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of: (a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and (b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset. Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. (ii) that could have been deducted, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the deduction had not been limited by the company’s income for that income year; and (ii) that could have been applied, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the application of the loss had not been limited by the company’s capital gains for that income year. 170‑C Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred #### 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years. #### 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). #### Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997. Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997. If: (a) all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (d) that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and (e) the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place. Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years. > introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament. Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day. #### Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting #### 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B. (1) The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day. (2) No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted. #### 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting (1) Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if: (a) the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and (b) none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount. (2) No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount. (1) This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account. (2) For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. > Note 2: If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60. (3) For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)). (4) For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. (5) The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if: (a) during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and (b) the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section. (a) the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and (b) during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components. (7) For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. (8) Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it: (b) the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component. (9) Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component. (10) For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002: (b) lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination; (c) a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination); (e) the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination); (f) the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination). Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period: 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows: (a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and (i) in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and (ii) in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. > Note: A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002. #### 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002: (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:23.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:87.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A franking surplus</span></p></td><td style="width:220.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.009.png" width="175" height="58" alt="Start formula Amount of the class A franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.010.png" width="190" height="56" alt="Start formula Amount of the class B franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.011.png" width="190" height="56" alt="Start formula Amount of the class C franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` #### 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus): (a) a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Original surplus</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:85.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>class A</span></p></td><td style="width:220.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.012.png" width="169" height="38" alt="Start formula Amount of the original class A surplus times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.013.png" width="169" height="38" alt="Start formula Amount of the original class B surplus times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.014.png" width="169" height="38" alt="Start formula Amount of the original class C surplus times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (4) If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit): (a) a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company. (5) The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking deficit into 1997 Act franking debit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Original deficit</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking debit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(4)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:70.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A</span></p></td><td style="width:235.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.015.png" width="164" height="38" alt="Start formula Amount of the original class A deficit times start fraction 39 over 61 end fraction end formula "></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.016.png" width="164" height="38" alt="Start formula Amount of the original class B deficit times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.017.png" width="164" height="38" alt="Start formula Amount of the original class C deficit times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (2) A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if: (c) the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions. (3) The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if: (b) the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and (1) While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit. (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year. (3) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: > Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act. (1) The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account. (a) a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time; (3) If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if: (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity. #### 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If: the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time. (1) Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections. (2) If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year. Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year. Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year. (5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in: that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement. (6) The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (7) The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (2) The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (3) The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (i) are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and (a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and (b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section. (a) whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and (1) This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002. (a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and (3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded. (1) This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002; (2) If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (3) If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (4) If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. (5) If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows: (a) any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and (i) in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and (ii) in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. #### 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF.  #### 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act). (2) If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus): (a) a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF. (4) If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit): (a) a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF. This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period). (1) The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period: (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (1) The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period. (2) The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner. (3) The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5. (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and (d) the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner; the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received. (3) A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time: (1) A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends. (2) However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period. (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (a) the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed: (d) the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and (e) the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return. (2) The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day. (1) The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period. (2) The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made. Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period. (b) on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax); the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed: (c) the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and (d) the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return. (2) The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day. The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period: If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day. If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and If: (a) a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and (b) the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment; In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment. If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment. The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with. If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953. (1) Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period. (a) the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and (b) the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3); the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on: (c) if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or If: Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax. Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division. If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997. (a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day: (3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002. (a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002: > Note: As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date. (b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997. In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003. (1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year. (a) a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of: (i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time; (iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period; (2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if: (b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time: (ii) the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. > Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. > Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. (7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table: <table cellspacing="0" cellpadding="0" style="width:365.35pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount of the franking credit and the exempting debit</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">If:</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the credit and debit is:</span></p></td></tr></thead><tbody><tr><td style="width:22.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The period starts immediately after 7.30</span><span> </span><span>pm by legal time in the Australian Capital Territory on 13</span><span> </span><span>May 1997</span></p></td><td style="width:141.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Both these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was not in surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>All these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was in surplus at the start of the period;</span></p><p class="Tablea"><span>(c) the surplus in the account at the switch time is greater than the surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the franking surplus in the Australian company’s franking account at the switch time; and</span></p><p class="Tablea"><span>(b) the franking surplus in the Australian company’s franking account at the start of the period</span></p></td></tr></tbody></table> ``` (a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and (b) the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period. Subdivision 235‑I of the Income Tax Assessment Act 1997 applies to assets acquired by the trustee of an instalment trust in: (1) Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years. (2) However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time). (3) The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997. Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997. (2) Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in: (1) Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that: (b) is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose. (a) if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007. > Note: To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997. (b) contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option; the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option. (3) For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5). (4) If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is: (a) the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less (b) the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest. (5) If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is: (6) If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil. (1) If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one. (2) If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year. (3) If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year. (a) for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and (b) for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year: Step 1. Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. Step 2. Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3). Step 3. If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year. > Note: Example: Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75): (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred: (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times: (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate. Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008. (a) the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and (b) the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities: (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (i) the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or (ii) the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and (f) none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made: (i) Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event; (ii) a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year. (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (b) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (c) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year #### 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year (a) the requirements set out in paragraphs 275‑610(1)(a), (b) and (c) of the Income Tax Assessment Act 1997 are satisfied in respect of an amount of non‑arm’s length income of a managed investment trust in relation to an income year; and (b) the managed investment trust became a party to the scheme mentioned in paragraph 275‑610(1)(a) of that Act before the day on which the Bill that became the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 was introduced into the House of Representatives; and Division 276 of the Income Tax Assessment Act 1997 as inserted in that Act by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (the amending Act) applies as set out in subitem 1(1) of Schedule 8 to the amending Act. (b) if the trustee of the trust has made a choice for the purposes of paragraph 1(1)(b) of Schedule 8 to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016—the first income year starting on or after 1 July 2015; or (c) if the trustee of the trust has made a choice for the purposes of subparagraph 276‑10(1)(e)(i) of the Income Tax Assessment Act 1997 in respect of the 2016‑17 income year—that income year. (c) the trust is an AMIT for an income year (the discovery year) that is the starting income year or a later income year. (1) This section applies if the trust has an under or over of a character in the discovery year relating to the base year. (b) if, at a time, the trust sent its members distribution statements for an income year that is prior to the starting income year—assume that the trust sent those members AMMA statements for that income year at that time. (3) For the purposes of Division 276 of the Income Tax Assessment Act 1997, treat the under or over mentioned in subsection (1) as an under or over of the AMIT, in the discovery year relating to the base year, of the character mentioned in that subsection. (a) had the under or over mentioned in subsection (1) been discovered before the starting income year, this Act would have operated to produce a particular effect (the pre‑AMIT scheme effect) for the base year in relation to the amount or amounts reflected in the under or over; and 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT #### 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT (b) working out the amount (if any) of the entity’s capital gain under subsection 104‑70(4) of the Income Tax Assessment Act 1997. (3) For the purpose of working out the amount of the non‑assessable part mentioned in paragraph 104‑70(1)(b), treat the following provisions as being in operation at the time the payment was made: (b) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in paragraph (a). (4) Subsection (3) does not apply to the extent (if any) that the entity, in the income tax return that it lodged for the income year in which the payment was made, included the amount of the payment in its assessable income for that income year. (5) For the purposes of section 118‑20 of the Income Tax Assessment Act 1997, treat this section as being in Part 3‑1 of that Act. (2) The Commissioner cannot amend the entity’s assessment for the income year in which the payment was made in a particular way if: (b) the Commissioner could not amend the assessment in that way if the following provisions were in operation at the time the payment was made: (ii) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in subparagraph (i); and Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82‑10F). (2) The object of this section is to apply (with modifications) provisions limiting deductibility in respect of certain contributions made during the period that: (a) Subdivisions AA and AB of Division 3 of Part III of the Income Tax Assessment Act 1936, as in force just before they were repealed by the Superannuation Legislation Amendment (Simplification) Act 2007; (b) any other provision of the Income Tax Assessment Act 1936, or of any instrument made under that Act, to the extent that it relates to the operation of those Subdivisions; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of those Subdivisions. (b) the deduction limit mentioned in section 82AAC for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (c) the deduction limit mentioned in section 82AAT for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (d) Division 290 of the Income Tax Assessment Act 1997 did not apply to contributions made during the income year mentioned in paragraph (a). (2) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of a defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection and subsection (4), the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 5 September 2006; (b) the defined benefit interest mentioned in paragraph (2)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 5 September 2006, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (2)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (4) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of the defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection, the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 12 May 2009; (b) the defined benefit interest mentioned in paragraph (4)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 12 May 2009, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (4)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (1) The object of this section is to apply (with modifications) provisions relating to excess non‑concessional contributions tax in respect of certain contributions made during the period that: (b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision. (ea) in a case where paragraph 292‑95(1)(b) of that Act would have allowed the contribution mentioned in that paragraph to be made at a time within that period—that paragraph allowed the contribution to be made on or before 30 June 2007; and (f) paragraph 292‑95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and (fa) in a case where subsection 292‑100(2), (4), (7) or (8) of that Act would have allowed the contribution mentioned in that subsection to be made at a time within that period—that subsection allowed the contribution to be made on or before 30 June 2007; and (g) paragraph 292‑100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and (h) contributions made during that period that are covered under section 292‑100 of that Act reduce the person’s CGT cap amount for the 2007‑2008 financial year in accordance with subsection 292‑105(2) of that Act (and despite subsection (1) of that section); and (i) if the conditions in subsection (4) are satisfied—the person’s excess non‑concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and (b) the Commissioner gives the person a transitional release authority under subsection 292‑80A(2) in response to the application; and (c) the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292‑80B within 21 days after the date of the release authority; and (d) the superannuation provider pays the person the amount required under section 292‑80C in relation to the transitional release authority. (b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act). (6) The amount to be included in the first person’s amount of non‑concessional contributions under subparagraph (3)(b)(ii) is the sum of: (a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and (b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made. (c) under Division 295 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)), the contribution is included in the assessable income of the superannuation provider in relation to the superannuation plan to which the contribution is made; and (8) For the purposes of paragraph (7)(b), treat the person as an employee of the other entity if the person would be treated as an employee of the other entity under Division 290 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)). (1) A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007. (2) The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292‑80(3)(b)(i), the person would have excess non‑concessional contributions for the financial year mentioned in paragraph 292‑80(3)(a). (4) For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out: The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 21 days after the date of the release authority. (1) A superannuation provider that has been given a transitional release authority in accordance with section 292‑80B must pay to the person within 30 days after receiving the release authority the least of the following amounts: (a) if the person requests the provider in writing to pay a specified amount in relation to the release authority—that amount; (c) the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person in complying superannuation plans. > Note 1: Section 288‑95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection. > Note 2: Section 288‑100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority. > Note 3: For reporting obligations on the superannuation provider in these circumstances, see section 390‑65 in Schedule 1 to the Taxation Administration Act 1953. (2) The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person in complying superannuation plans. (3) Section 307‑125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section. (a) your non‑concessional contributions cap for the 2015‑2016 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsection 292‑85(7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 applies after the commencement of this section as if: (d) subsection 292‑85(6) of that Act as so amended had been applied (taking into account paragraph (c) of this subsection) for the purposes of working out your non‑concessional contributions cap for the 2016‑2017 financial year. (2) For the purposes of working out your non‑concessional contributions caps for the 2017‑2018 financial year and the 2018‑2019 financial year, if: (a) your non‑concessional contributions cap for the 2016‑2017 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsections 292‑85(6) and (7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 apply after the commencement of this section as if the amount worked out under subsection 292‑85(5) of that Act as so amended were $380,000. (3) To avoid doubt, this section does not affect your non‑concessional contributions cap for any financial year that ended before 1 July 2017. The tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your non‑concessional contributions (see section 292‑90 of the Income Tax Assessment Act 1997) for the financial year. (2) Subject to section 294‑55, the amendments of Division 294 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Treasury Laws Amendment (2017 Measures No. 2) Act 2017 apply on and after 1 July 2017. Despite sections 294‑30 and 294‑140 of the Income Tax Assessment Act 1997 (which are about when you have excess transfer balance), you do not have excess transfer balance in your transfer balance account on any day in the period of 6 months beginning on 1 July 2017 if: (a) the only transfer balance credits in the account in that period arose under item 1 of the table in subsection 294‑25(1) of that Act (which is about superannuation income streams you have just before 1 July 2017); and (b) the sum of those transfer balance credits exceeds your transfer balance cap, but is less than or equal to $1,700,000; and (c) at the end of the period, the sum of all the transfer balance debits arising in your transfer balance account equals or exceeds the amount of the excess from paragraph (b). (1) Despite subsection 294‑10(2), a transfer balance credit arises under item 4 of the table in subsection 294‑25(1) of the Income Tax Assessment Act 1997 only in relation to a borrowing that arises under a contract entered into on or after 1 July 2017. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2017 is treated as if it arose under a contract entered into before 1 July 2017 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) on 1 July 2017, a transfer balance debit arose in your transfer balance account under item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997; and (b) the sum of all the transfer balance credits that arise in your transfer balance account under item 1 of the table in subsection 294‑25(1) of that Act exceeds the amount that would, apart from this section, be the amount of that debit. (2) Despite column 2 of item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997, the amount of the transfer balance debit is instead equal to the sum worked out under paragraph (1)(b) of this section. 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain > The object of this Subdivision is to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the following legislative changes: (a) the introduction of a transfer balance cap (as a result of Schedule 1 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016); (b) the exclusion of transition to retirement income streams (and similar income streams) from being superannuation income streams in the retirement phase (as a result of Schedule 8 to that Act). (a) starting on the start of the day on which the Bill that became the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 was introduced into the House of Representatives; and (a) at the start of the pre‑commencement period, a CGT asset of a fund is a segregated current pension asset of the fund; and (i) at a time (the cessation time) in the pre‑commencement period, the asset ceases to be a segregated current pension asset of the fund; or (ii) at the start of 1 July 2017 (also the cessation time), the asset ceases to be a segregated current pension asset of the fund because it supports a superannuation income stream covered by subsection 307‑80(3) of the Income Tax Assessment Act 1997; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (b) the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year is greater than nil; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and #### 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑115(3)(a), the fund makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the fund’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Subsection 295‑390(1) of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). > 2016‑17 non‑exempt proportion means 1 minus the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year. #### 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset (i) the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997 in respect of the trust for the 2016‑17 income year; (ii) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year; and (d) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and #### 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑125(3)(a), the trust makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the trust’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Section 295‑400 of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). (a) unless paragraph (b) applies—1 minus the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997; or (b) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage worked out by subtracting the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year from 100%. This Subdivision applies to an entity that is the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust. For the purposes of this Subdivision, an asset is a 30 June 1988 asset of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust if the entity owned it at the end of 30 June 1988. > Note: Section 295‑90 of the Income Tax Assessment Act 1997 treats these assets as having been acquired on 30 June 1988. (1) The first element of the cost base of each 30 June 1988 asset of the entity’s is the greater of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). (2) The first element of the reduced cost base of each 30 June 1988 asset of the entity’s is the lesser of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). the market value of the asset as at the end of 30 June 1988 is the average of the highest and lowest trade prices for identical assets recorded on 30 June 1988 in whichever of the following markets is applicable: (d) if, on that date, there was a State capital city market (other than the Sydney market) that recorded a higher volume of trading than the Sydney market in identical assets—that State capital city market; (2) For the purposes of this section, an asset is taken to have been listed on an Australian stock exchange on 30 June 1988 if, and only if, on that day the asset had the status of having been granted official quotation by a securities exchange within the meaning of the former Securities Industry Act 1980 or the law of a State or Territory corresponding to that former Act. (b) at any time during the period commencing at the time when the shares were acquired and ending at the end of 30 June 1988, the company paid an amount that was not a dividend to the entity in respect of the shares; (b) at any time during the period commencing at the time when the interest or unit was acquired and ending at the end of 30 June 1988, the trustee of the trust paid an amount to the entity in respect of the interest or unit, being: (i) in a case where the entity was exempt from tax for the year of income in which the payment was made—an amount that, if the entity had not been exempt from tax, would not have been the entity’s assessable income; or the cost base to the entity of the interest or unit as at 30 June 1988 is reduced by so much of the amount as is not attributable to a deduction allowed under former Division 10C or 10D of the Income Tax Assessment Act 1936. (1) Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (2) and (3) of this section apply if an entity exercises rights or options as mentioned in that section to acquire: (b) the greater of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (b) the lesser of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (4) The payment referred to in subsection (2) or (3) can include giving property. To the extent that the payment does, use the market value of the property in working out the amount of the payment. (1) A notice given under subsection 82AAT(1A) or (1CB) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑170 of the Income Tax Assessment Act 1997. (2) A notice given under subsection 82AAT(1C) or (1CD) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑180 of the Income Tax Assessment Act 1997. (1) A proportion of the ordinary income and statutory income of a continuously complying fixed interest ADF of an income year that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).  > Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the income year. > Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the income year. (4) A choice for the purposes of the definition of reckoning time in subsection (5) must be made on or before the date of lodgment of the income tax return of the ADF for the income year to which the choice relates, or before a later day allowed by the Commissioner. > continuously complying fixed interest ADF, in relation to an income year (the current year), means a fund that is a fixed interest complying ADF in relation to each of the following years: > current 25 May balance, in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time: (b) subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 September 1989 is to be added to the balance; (b) a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that day, made a deposit with the ADF that consisted wholly or partly of the roll‑over (as defined in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 as in force on that day) of an eligible termination payment as so defined, being an eligible termination payment that included a concessional component (as so defined). > fixed interest complying ADF, in relation to a year of income, means a complying ADF where both of the following conditions are satisfied: (a) not less than 90% of the amount that, apart from this section, would be the assessable income of the ADF of the income year (other than non‑arm’s length income or amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997) consists of any one or more of the following: (ii) any profit arising on the disposal, redemption, cancellation or maturity of a CGT asset referred to in paragraph 295‑85(3)(b) of the Income Tax Assessment Act 1997; (iii) an amount included in assessable income under Division 16E of Part III of the Income Tax Assessment Act 1936 (or would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply); (ii) virtual PST life insurance policies (as defined in the Income Tax Assessment Act 1997) issued by a life insurance company. > original 25 May balance, in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988. > reckoning time, in relation to an ADF in relation to an income year, means the beginning of the income year, or such other time during the income year as the ADF chooses in accordance with subsection (4). (6) This section does not apply to an ADF in relation to an income year unless the whole of the benefit that would accrue to the ADF from the application of this section in relation to the income year has been, or can reasonably expected to be, passed on to eligible depositors. An election made by the trustee of a complying superannuation fund under subsection 279(4) of the Income Tax Assessment Act 1936 that had effect for the income year of the fund in which 30 June 2007 occurs continues to have effect as if it had been made under section 295‑465 of the Income Tax Assessment Act 1997. Subdivisions 295‑I (no‑TFN contributions) and 295‑J (Tax offset for no‑TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006‑2007 income year ends on a day (the end day) after 1 July 2007 as if: (b) the entity’s no‑TFN contributions income for the entity’s 2007‑2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007‑2008 income year if the contributions concerned had been made in the entity’s 2007‑2008 income year. (2) Division 301 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section because you are a member of the fund in the same way as it would apply if the payments were superannuation member benefits paid to you from a complying superannuation fund. For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. Subdivision 301‑F of the Income Tax Assessment Act 1997 applies in relation to income years starting on or after 1 July 2007. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to the following in respect of an income year that starts on or before 1 July 2021: (b) the amendments of the Income Tax Assessment (1997 Act) Regulations 2021 made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023. (a) a superannuation benefit (the trigger benefit) was paid to a person in the 2020‑21 income year or an earlier income year; and (c) the trigger benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; and (2) The Commissioner cannot amend an assessment on the basis that a superannuation benefit paid to the person is a superannuation income stream benefit because of the amendments made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 if: (iii) the superannuation benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (a) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (b) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. (1) The Minister may, by legislative instrument, make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions) that: (a) relate to the amendments or repeals made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023; and (2) Without limiting subsection (1), rules made under this section before the end of the period of 12 months starting on the day that Schedule commences may provide that provisions of that Schedule, or any other Act or instrument, have effect with any modifications prescribed by the rules. Those provisions then have effect as if they were so modified. (2) Division 302 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section after another person’s death, because the other person was a member of that fund, in the same way as it would apply if the payments were superannuation death benefits paid to you from a complying superannuation fund. For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if: (b) just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. (2) For the purposes of Subdivision 82‑B of Division 82, Division 302 and section 303‑5 of the Income Tax Assessment Act 1997, the definition of death benefits dependant in section 302‑195 of that Act applies as if paragraphs (a) and (b) of the definition were replaced with the following paragraphs: (a) a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008 or a person who was formerly such a spouse; or (b) a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008, who is aged less than 18. (ii) a superannuation guarantee payment, a small superannuation account payment, an unclaimed money payment, a superannuation co‑contribution benefit payment or a superannuation annuity payment. (2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you at a time in the period: (i) a condition of release specified in item 107A or 207AA of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; or (ii) a condition of release specified in item 109AA of the table in Schedule 2 to the Retirement Savings Accounts Regulations 1997. (1) This section applies to a superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with section 292‑80B. (2) The superannuation benefit is not assessable income and is not exempt income to the extent that it does not exceed the amount mentioned in subsection (3). (3) The amount is the amount of excess non‑concessional contributions stated in the release authority in accordance with paragraph 292‑80A(3)(a), reduced (but not below zero) by the amount of any superannuation benefit that was not assessable income and not exempt income under a previous operation of subsection (2) in relation to the release authority. (4) The superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3). (a) you have an interest in a FIF (within the meaning of Part XI of the Income Tax Assessment Act 1936, as in force just before the commencement of item 37 of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010) (the paying fund); and (b) Subdivision 305‑B of the Income Tax Assessment Act 1997 applies in relation to the paying fund (see section 305‑55 of that Act); and (c) the paying fund transfers an amount to a complying superannuation fund in respect of you during the deduction year; and (d) you choose under section 305‑80 of the Income Tax Assessment Act 1997 that the amount, or part of the amount, is to be treated as assessable income of the complying superannuation fund; and (e) immediately before the transfer happens, there is a post‑FIF abolition surplus (within the meaning of the Income Tax Assessment Act 1936) for the paying fund in relation to you; and For the purposes of the definition of specified roll‑over amount in the Income Tax Assessment Act 1997, treat the taxable component of a directed termination payment (within the meaning of section 82‑10F) as the element untaxed in the fund of a superannuation benefit that is a roll‑over superannuation benefit. (1) This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007. > Note: This section also applies to an income stream replacing an earlier one because of an involuntary roll‑over (see section 307‑127). (2) Despite subsection 307‑125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows: (a) first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007); (b) next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits. The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit. (3) Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened: (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day; (ba) the holder of the superannuation interest is aged 60 or above on 1 July 2007, if none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day. (a) treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and (b) work out the tax free component of the superannuation interest for the purposes of section 307‑125 of the Income Tax Assessment Act 1997 under subsections (6) and (6A). (i) an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and (ii) the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time; (b) next, work out the unused undeducted purchase price (within the meaning of paragraph (a) of the definition of that term in subsection 27A(1) of the Income Tax Assessment Act 1936 just before the commencement of this section, and disregarding paragraphs (b) and (c) of that definition) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007; (c) next, work out the pre‑July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this section) of the eligible termination payment. (a) at least one superannuation income stream benefit was paid from the superannuation income stream before 1 July 1994; or (b) section 27AAAA of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007) applied to the superannuation income stream just before 1 July 2007; (7) For the purposes of paragraph (6)(c), disregard the value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment. (8) If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as: (b) if 1 or more other events mentioned in subsection (3) happened before the commutation—the time just before the earliest of those events happens. (a) references in that section to the later income stream (in relation to a time, or event happening, before the payment of that involuntary roll‑over superannuation benefit) include references to the earlier income stream; and (b) references in that section to the superannuation interest supporting the later income stream (in relation to a time, or event happening, before the payment of that benefit) include references to the earlier interest. (1) This section applies for the purposes of working out the amount of your total superannuation balance just before 1 July 2017. (2) The transfer balance mentioned in paragraph 307‑230(1)(b) of the Income Tax Assessment Act 1997 just before 1 July 2017 is taken to be equal to: (a) the sum of the transfer balance credits (if any) in your transfer balance account just after the start of 1 July 2017; less (b) the sum of the transfer balance debits (if any) arising in your transfer balance account on 1 July 2017 under item 4 of the table in subsection 294‑80(1) of that Act (about payment splits). (1) Section 307‑231 of the Income Tax Assessment Act 1997 applies in relation to borrowings that arise under contracts entered into on or after 1 July 2018. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2018 is treated as if it arose under a contract entered into before 1 July 2018 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) treat a deduction made under former section 279 of the Income Tax Assessment Act 1936 as having been made under section 295‑465 of the Income Tax Assessment Act 1997 instead; and (b) treat a deduction made under former section 279B of the Income Tax Assessment Act 1936 as having been made under section 295‑470 of the Income Tax Assessment Act 1997 instead. If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007‑2008 income year is, despite subsection 307‑345(1), the total of: (b) the amount by which $140,000 exceeds the upper limit for the 2006‑2007 income year (worked out under section 159SG of that Act). Division 316 of the Income Tax Assessment Act 1997 applies in relation to demutualisations occurring on or after 1 July 2008. If: (a) any assets held by the benefit funds of a life insurance company that is a friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a complying superannuation fund; and (b) the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer; the transfer is disregarded for any purposes of the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936. (1) In working out the amount that a life insurance company can deduct, in respect of life insurance policies that are disability policies (other than continuous disability policies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income. (2) In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection (1) applies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company’s liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320‑85(4) of that Act. If: (2) If the life insurance company wishes to include a part of an approved asset in its virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑87(2) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society establishes a virtual PST in the 2000‑01 income year, the calculation of the transfer values of the company’s virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year. (1) Subsection (3) applies for the purposes of subparagraph (b)(i) of the definition of virtual PST life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 259 of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007. (2) Subsection (3) also applies for the purposes of subparagraph (b)(i) of the definition of complying superannuation/FHSA life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 47 of Schedule 7 to the First Home Saver Accounts (Consequential Amendments) Act 2008. (3) Treat an annuity as having been purchased out of a superannuation lump sum or an employment termination payment, if the annuity was purchased: (b) out of an eligible termination payment (within the meaning of the Income Tax Assessment Act 1997, as in force just before the commencement mentioned in subsection (1) of this section). (2) If the life insurance company wishes to include a part of an approved asset in its segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (a) a life insurance company had a liability before 1 July 2000 under a life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and (c) there is a transfer of the company’s assets to the segregated exempt assets to meet that liability or that part of the liability; (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑105(1) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320‑225 of the Income Tax Assessment Act 1997 in the 2000‑01 income year, the calculation of the transfer values of the company’s segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year. Section 322‑25 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Part VC of the Insurance Act 1973 after 17 October 2008. 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you > new Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force after the commencement of this section. > old Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. > STS taxpayer means an STS taxpayer within the meaning of Division 328 of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. #### 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years (1) This section applies for the purpose of working out whether you are a small business entity (other than because of subsection 328‑110(4) of the Income Tax Assessment Act 1997) for the 2007‑08 or 2008‑09 income year. (2) You work out your aggregated turnover for the 2005‑06 or 2006‑07 income year as if the amendments made by Schedule 1 to the Tax Laws Amendment (Small Business) Act 2007 had been in force in relation to that year. (a) your aggregated turnover for the 2005‑06 income year (worked out in accordance with subsection (2)) is $2 million or more; but (b) your STS group turnover for that year (worked out under Subdivision 328‑F of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section) is less than $2 million. (2) The following provisions apply as if you are a small business entity for the income year in which you are winding up the business: #### 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you (1) For the purpose of working out whether you are a small business entity for the 2007‑08, 2008‑09, 2009‑10 or 2010‑11 income year (each a relevant income year) for the purposes of a provision to which subsection (3) applies: (2) An entity (the first entity) controls a discretionary trust for a relevant income year if, for any of the 4 income years (a previous income year) before that year: (a) if the previous income year is before the 2007‑08 income year—the trustee of the trust made a distribution of $100,000 or more to the first entity, any of its affiliates, or the first entity and any of its affiliates; or (i) the trustee of the trust paid to, or applied for the benefit of, the first entity, any of the first entity’s affiliates, or the first entity and any of its affiliates, any of the income or capital of the trust; and (ii) the percentage (the control percentage) of the income or capital paid or applied is at least 40% of the total amount of income or capital paid or applied by the trustee for that year. (1) This section sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (2) This section also sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (3) Any ordinary income that, apart from paragraph 328‑105(1)(a) of the Income Tax Assessment Act 1997 (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have derived before the changeover year (while you were using the STS accounting method) and you have not included in your assessable income because you have not received it is included in your assessable income for the changeover year. (4) Any general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, that, apart from paragraph 328‑105(1)(b) of that Act (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have incurred before the changeover year (while you were using the STS accounting method) and that you have not deducted because you have not paid them can be deducted for the changeover year. (b) for any later income year for which you are a small business entity but only if you used the STS accounting method for the income year before that later year. > Note: Example: You are a small business entity for the 2007‑08 and 2008‑09 income years and you continue to use the STS accounting method for those years. You are not a small business entity for the 2009‑10 income year so you cannot continue to use the STS accounting method for that year. Because you cannot use the STS accounting method for the 2009‑10 income year, you will not be able to use it again for a later income year even if you are a small business entity for that later year. In sections 328‑115 and 328‑120, STS accounting method means the accounting method that was required by the Income Tax Assessment Act 1997 to be used by STS taxpayers for the 2004‑05 income year. (b) you made a choice under subsection 328‑175(3) of old Subdivision 328‑D in relation to a depreciating asset you use to carry on a primary production business and for which you could deduct amounts under Subdivision 40‑F or 40‑G of the Income Tax Assessment Act 1997. (2) In determining whether you can choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997 in an increased access year, disregard subsection 328‑175(10) of that Act. (3) In applying paragraph 328‑175(10)(b) of that Act for the purpose of determining whether you can choose to use that Subdivision in any income year after the increased access years, disregard: (4) Paragraph 328‑180(1)(b) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that paragraph to $1,000: (i) first used the asset, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (i) first used the asset, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (i) first used the asset, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, on or after 1 July 2023 and on or before 30 June 2026. (a) a reference in that paragraph to the end of the income year in which you start to use the asset, or have it installed ready for use, for a taxable purpose were a reference to the earlier of: if: (i) first used the asset, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021. (5) Paragraph 328‑180(2)(a) or (3)(a) of the Income Tax Assessment Act 1997 applies to an amount included in the second element of the cost of an asset as if a reference in that paragraph to $1,000: (5A) For the purposes of determining whether, under subsection 328‑180(2) of the Income Tax Assessment Act 1997, you can deduct, for an income year (the current year), the taxable purpose proportion of an amount included in the second element of the cost of an asset, disregard paragraph (b) of that subsection if: (2) For the purposes of determining whether subsection 328‑180(1) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (b) of that subsection (which sets a limit of $1,000 on the cost of the asset) if, in the period beginning at the 2020 budget time and ending on 30 June 2023, you: (3) For the purposes of determining whether subsection 328‑180(2) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (a) of that subsection (which sets a limit of $1,000 on the amount) if the amount is included in the second element of the cost of the asset at any time in the period beginning at the 2020 budget time and ending on 30 June 2023. (4) In applying paragraph 328‑180(3)(a) of the Income Tax Assessment Act 1997 to an asset, disregard an amount included in the second element of the cost of the asset if the amount is deducted under subsection 328‑180(2) of that Act, as modified by subsection (3) of this section. (5) Section 328‑210 of the Income Tax Assessment Act 1997 applies as if the words “less than $1,000 but” in subsection (1) were disregarded, in relation to a deduction for an income year that ends: Subsection 328‑190(2) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that subsection to 15% were a reference to 57.5% if you are covered by section 40‑125 for the asset (which is about backing business investment). (1) A depreciating asset of yours that had been allocated to your general STS pool is treated as being allocated to your general small business pool. (2) A depreciating asset of yours that had been allocated to your long life STS pool is treated as being allocated to your long life small business pool. (3) If you made a choice, under subsection 328‑185(5) of old Subdivision 328‑D, not to have a depreciating asset allocated to your long life STS pool, the choice has effect for the purposes of subsection 328‑185(5) of new Subdivision 328‑D. (1) This section applies if a depreciating asset of yours is treated as being allocated to your general small business pool or long life small business pool under section 328‑185. (2) The opening pool balance of your general small business pool or long life small business pool for the 2007‑08 income year is taken to be the closing pool balance of your general STS pool or long life STS pool, as the case requires, for the 2006‑07 income year, reduced or increased by any adjustment required under section 328‑225 of new Subdivision 328‑D (about change in the business use of an asset). (a) you were not an STS taxpayer for the 2006‑07 income year (because you stopped being an STS taxpayer before that time); but (b) you are a small business entity for the 2007‑08 income year or a later income year and you choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets for that income year; the opening pool balance of your general small business pool or long life small business pool includes the sum of the taxable purpose proportions of the adjustable values of depreciating assets allocated to the pool under subsection 328‑185(3) of new Subdivision 328‑D for that year. (1) This section applies for the purposes of applying Subdivision 328‑D of the Income Tax Assessment Act 1997 for the 2012‑13 income year and later income years. (2) A depreciating asset that had been allocated to your long life small business pool is treated as being allocated to your general small business pool. (a) the closing pool balance of your general small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under section 328‑225 of that Act; and (b) the closing pool balance of your long life small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under that section. (1) This section applies if you chose to stop being an STS taxpayer for the 2005‑06 income year or the 2006‑07 income year. (2) You cannot choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets until at least 5 years after the income year for which you chose to stop being an STS taxpayer. > Note: Subdivision 328‑D of the Income Tax Assessment Act 1997 continues to apply to depreciating assets that have been allocated to your small business pools even if you are not a small business entity, or do not choose to use that Subdivision, for an income year: see section 328‑220 of that Subdivision. (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct 20% of particular expenditure for your 2023‑24 income year if: (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (d) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑450 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (6) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (ii) if the provider is a registered body of a kind listed in paragraph (2)(b), (c) or (d)—the training is within the provider’s scope of registration for that kind of registered body; and (d) each enrolment, or arrangement, for the provision of the training is made or entered into at or after 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022; and > Note: Paragraphs (b) and (c) mean this section will not apply to expenditure for on‑the‑job training or training provided by you in house. (a) a registered higher education provider (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); (b) a NVR registered training organisation (within the meaning of the National Vocational Education and Training Regulator Act 2011); (c) a registered education and training organisation (within the meaning of the Education and Training Reform Act 2006 (Vic.)); (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct for your 2023‑24 income year an amount that is equal to the sum of: (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (3) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑460 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (4) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (b) you incur the expenditure in the period starting at 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022 and ending at the end of: (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (4) For the purposes of paragraphs (1)(c) and (2)(c), in working out whether you can deduct an amount of expenditure on a depreciating asset, assume that: (b) throughout that effective life, you will use the asset for a taxable purpose to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose. (a) 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑470(1) or (3) applies in relation to the income year; and > Note: The deduction relates to the period of 1 July 2023 to 30 June 2024. An entity may have deducted an amount under paragraph (a) for a previous income year if the entity has a substituted accounting period. (2) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑470 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (3) Sections 8‑10, 40‑215 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (c) you start to use the asset, or have it installed ready for use, for any purpose after 30 June 2023 but before 1 July 2024; and (d) you start to use the asset, or have it installed ready for use, for a taxable purpose at a time (the start time) that is: (e) you are a small business entity, or an entity covered by subsection (4), for the income year that includes the start time; and (h) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) a new reasonably comparable depreciating asset that uses a fossil fuel (other than a use of which that is merely incidental) is available in the market at the start time; (ii) if the asset is being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than the other asset; (iii) if the asset is not being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than a new reasonably comparable depreciating asset that is available in the market at the start time; or (i) a depreciating asset (other than an asset excluded under subsection (6)) that uses electricity, or energy that is generated from a renewable source, to be more energy efficient; (iv) the use of electricity, or energy that is generated from a renewable source, by another depreciating asset to be monitored. (a) the amount is included in the second element of a depreciating asset’s cost under paragraph 40‑190(2)(a) of the Income Tax Assessment Act 1997; and (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (d) you are a small business entity, or an entity covered by subsection (4), for the income year in which the expenditure is incurred; and (i) if the asset could use a fossil fuel (other than a use of which that is merely incidental)—the asset to only use electricity, or energy that is generated from a renewable source; (ii) if the asset uses electricity, or energy that is generated from a renewable source—the asset to be more energy efficient; (g) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) For the purposes of paragraph (1)(b) or (3)(b), in working out whether you can deduct an amount of expenditure assume that: (i) for the purposes of paragraph (1)(b)—to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose; or (ii) for the purposes of paragraph (3)(b)—to the same extent as you use it for a taxable purpose in the income year in which the expenditure is incurred. (b) expenditure (other than expenditure referred to in subparagraph (3)(e)(i)) on an asset that can use a fossil fuel (other than a use of which that is merely incidental); (c) an asset that solely or predominantly generates electricity from a renewable source (for example, photovoltaic cells) or expenditure on such an asset; (d) an asset, or expenditure, being capital works for which you can deduct an amount under Division 43 of the Income Tax Assessment Act 1997; > Note: Subsections (1) and (3) also do not apply to an item of trading stock because such an asset is not a depreciating asset: see section 40‑30 of the Income Tax Assessment Act 1997. A reference in each of the following provisions of the Income Tax Assessment Act 1997 to a registration under section 27A of the Industry Research and Development Act 1986 includes a reference to a registration under former section 39J of that Act: (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) the R&D entity cannot deduct an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from: (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D entity could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:22pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the R&D entity is taken to be able to deduct under subsection 355‑315(2) of the new Act that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the R&D entity’s assessable income for the event year under subsection 355‑315(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 for the asset, the R&D entity is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑446 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the R&D entity is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑465 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: Section 355‑315 of the new Act would otherwise apply for the event in a case where the R&D entity had new law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by an R&D partnership; and (i) the partner can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the partner chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D partnership could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the partner is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:21.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D entity</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D partnership</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the partner is taken to be able to deduct under subsection 355‑525(2) of the new Act the partner’s proportion of that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the partner’s assessable income for the event year under subsection 355‑525(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partner’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if one or more partners (including the partner) in the R&D partnership is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset, the partner is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑448 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the partner is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑467 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s deductions under section 355‑520 of the new Act mentioned in subsection (4A) of this section. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the partner for the event, do so apply to the partner for the event. > Note 1: Section 355‑525 of the new Act would otherwise apply for the event in a case where the partner had new law deductions. Item 7 of the table in subsection 57‑110(2) in Schedule 2D to the Income Tax Assessment Act 1936 applies as if the deduction rules set out in the final column of that item also included former sections 73BA and 73BH of the Income Tax Assessment Act 1936. For the purposes of step 1 of the method statement in subsection 355‑415(2) of the Income Tax Assessment Act 1997, also disregard amounts that have already been taken into account under former subsection 73B(14AA) of the Income Tax Assessment Act 1936 for the R&D entity, the grouped entity and the R&D activities for an earlier income year. (1) This section applies if, apart from former paragraph 73B(10)(a) of the Income Tax Assessment Act 1936, an eligible company could deduct advance R and D expenditure in one or more income years commencing on or after 1 July 2011. > Note: That deduction would be under former section 73B of that Act as that former section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (a) apart from Subdivision H (prepaid expenditure) of Division 3 of Part III of the Income Tax Assessment Act 1936, an eligible company can deduct an amount under former section 73B, 73BA, 73BH, 73QA, 73QB or 73Y of that Act for an income year commencing before 1 July 2011; and (c) apart from former paragraph 73B(10)(a) of that Act, the eligible company could deduct an amount, as a result of that application of that Subdivision, for an income year commencing on or after 1 July 2011. > Note: That deduction would be under that Act as it applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (3) Former paragraph 73B(10)(a) of that Act is taken to apply to those income years commencing on or after 1 July 2011 as if the reference in that former paragraph to section 39J of the Industry Research and Development Act 1986 were a reference to section 27A of that Act. (4) An expression used in this section that is also used in former section 73B of the Income Tax Assessment Act 1936 has the same meaning in this section as it has in that former section. This Subdivision applies to core technology (within the meaning of former section 73B of the Income Tax Assessment Act 1936) if: (a) you incurred core technology expenditure (within the meaning of that former section) in an income year commencing before 1 July 2011 in relation to the core technology under one or more contracts entered into at or after the time referred to in former subsection 73B(12) of that Act; and (b) that expenditure (the undeducted expenditure) cannot be deducted for the last income year commencing before 1 July 2011. (1) This section applies for the purposes of Division 40 of the Income Tax Assessment Act 1997, other than sections 40‑292 and 40‑293 of that Act, if the core technology (the asset) is a depreciating asset. (2) Disregard this section, including its effect on the amount you can deduct under section 40‑25 of that Act for the asset, for the purposes of working out: (3) The asset’s opening adjustable value for the first income year that commences on or after 1 July 2011 (the first new income year) is equal to the amount of the undeducted expenditure. (4) Subsection 40‑75(2) of the Income Tax Assessment Act 1997 applies to the asset as if the first new income year were a change year (within the meaning of that subsection). If the core technology is not a depreciating asset, you can deduct the undeducted expenditure in equal proportions over a period of 5 income years starting in the first income year commencing on or after 1 July 2011. To work out the film component (if any) of your tax loss for the 1997‑98 income year or a later income year, apply former section 375‑805 of the Income Tax Assessment Act 1997. If you incurred a film loss for the purposes of former section 79F (Film losses of 1989‑90 to 1996‑97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989‑90 to 1996‑97 income years, that film loss is the film component of your tax loss for that income year. (1) To work out your film loss (if any) for the purposes of the Income Tax Assessment Act 1997 for the 1989‑90 or a later income year, apply former section 375‑810 of that Act. (2) You can deduct in the 1997‑98 or a later income year your film loss for any of the 1989‑90 to 1996‑97 income years only to the extent that it has not already been deducted. (1) Division 392 of the Income Tax Assessment Act 1997 applies to assessments for the 1998‑99 income year and later income years. (a) it had applied to your assessment for each income year before the 1998‑99 income year for which Division 16 of Part III of the Income Tax Assessment Act 1936 applied in relation to your income; and (b) you had carried on a primary production business during each income year before the 1998‑99 income year when you carried on a business of primary production; and (c) for each income year before the 1998‑99 income year you had a basic taxable income equal to your taxable income for the income year for the purposes of Division 16 of Part III of the Income Tax Assessment Act 1936. > Note: Section 149A of the Income Tax Assessment Act 1936 identifies what your taxable income for an income year is for the purposes of Division 16 of Part III of that Act. Division 392 of the Income Tax Assessment Act 1997 does not apply to your assessment for the 1998‑99 income year or a later income year if you made an election under section 158A (Election that Division not apply) of the Income Tax Assessment Act 1936 relating to an income year before the 1998‑99 income year. 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 A reference in Division 393 of the Income Tax Assessment Act 1997 to a deduction under section 393‑5 of that Act for making a farm management deposit is taken to include a reference to a deduction under section 393‑10 in Schedule 2G to the Income Tax Assessment Act 1936, as in force just before the commencement of this section, if the deposit was made before the 2010‑11 income year. #### 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 (b) the deposit was made with an FMD provider as a result of a request to which section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, applied; the unrecouped FMD deduction in respect of the deposit at that time is equal to the amount of the unrecouped deduction (within the meaning of the former subsection 159GA(3) of the Income Tax Assessment Act 1936) in respect of the deposit immediately before it ceased to be a deposit under the Loan (Income Equalization Deposits) Act 1976. > Note: This means that the unrecouped deduction relating to the deposit under the Loan (Income Equalization Deposits) Act 1976 continues to apply (by becoming an unrecouped FMD deduction) when the deposit is transferred to an FMD provider as a farm management deposit. The Loan (Income Equalization Deposits) Act 1976 was repealed on 22 February 2005. If a beneficiary of a trust was covered by paragraph (c) of the definition of primary producer in section 393‑25 in Schedule 2G to the Income Tax Assessment Act 1936 in the 2009‑10 income year, treat subsection 393‑25(3) of the Income Tax Assessment Act 1997 as having applied to the beneficiary for the purpose of determining the maximum number of choices that the trustee may make under subsection 393‑27(2) of that Act for the 2010‑11 income year. (a) a farm management deposit of an owner was unclaimed moneys for the purposes of section 69 of the Banking Act 1959; and (2) For the purpose of subsection 393‑10(1) of the Income Tax Assessment Act, treat the repaid unclaimed moneys as a repayment of the deposit of the owner. (3) To avoid doubt, the payment of unclaimed moneys to the Commonwealth under section 69 of the Banking Act 1959 is not a repayment of the deposit of the owner for the purposes of Division 393 of the Income Tax Assessment Act 1997. 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 #### 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 If a farm management deposit was made with an FMD provider as a result of a request under section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, then: (a) subsections 393‑40(1) to (4) of the Income Tax Assessment Act 1997 apply as if the day the deposit was made was the day on which the deposit was originally made under the Loan (Income Equalization Deposits) Act 1976; and (1) A copyright collecting society to which section 51‑43 of the Income Tax Assessment Act 1997 applies, may elect that, from 1 July 2004, the section apply to all ordinary income, and statutory income, collected or derived by the society on or after 1 July 2004. Division 420 of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division. Subdivision 615‑C of the Income Tax Assessment Act 1997 applies to you with the modifications set out in this Subdivision if you chose to obtain a roll‑over involving \*shares or units that: (b) were your trading stock, or revenue assets, at the time immediately before that disposal, redemption or cancellation. (1) Disregard subparagraph 615‑45(a)(ii), and paragraph 615‑45(b), of the Income Tax Assessment Act 1997 if the roll‑over relates to \*shares that were disposed of, redeemed or cancelled. (2) For each of the \*shares in the interposed company that you acquired in return for those of your shares or units in the original entity that were your \*trading stock at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  (2) For the purpose of calculating any profit or loss on a future disposal, cessation of ownership, or other realisation of a \*share in the interposed company that you acquired in return for those of your shares or units in the original entity that were \*revenue assets at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  Subdivision 620‑A of the Income Tax Assessment Act 1997 applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. (1) Part 3‑90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Act (No. 1) 2002 and amended by: (2) Section 713‑50 of the Income Tax Assessment Act 1997 (about factors to consider in determining destination of distribution by non‑fixed trust) applies for the purposes of this Part in the same way as it applies for the purposes of Part 3‑90 of that Act. ### Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly‑owned subsidiary of the entity (the future head company) that became the head company of the group; or (ii) at some time during that period, the entity was a wholly‑owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (ii) it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (1) If a group is a transitional group, its head company may, subject to subsection (3), choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (3) If the choice is to be made after the end of the period mentioned in paragraph (2)(a) and before the end of the day mentioned in paragraph (2)(b), it cannot be made unless each entity in relation to which the conditions in subsection (5) are satisfied has agreed to it being made. (a) the entity (the leaving entity) ceased to be a subsidiary member of the group before the choice was made (in a subsection (3) case) or before the revocation took place (in a subsection (4) case); and (b) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; and (c) the asset had become that of the head company because that section applied when a chosen transitional entity (whether or not the same entity as the leaving entity) became a subsidiary member. Section 716‑855 applies for the purposes of this Division in the same way as that section applies for the purposes of Part 3‑90 of the Income Tax Assessment Act 1997. is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705‑B of that Act and with this Division. 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity Section 701‑10 (cost to head company of assets of joining entity) and subsection 701‑35(4) (setting value of trading stock at tax‑neutral amount) of the Income Tax Assessment Act 1997 do not apply to the assets of a chosen transitional entity. > Note: The fact that the head company inherits the entity’s history under section 701‑5 of that Act when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time. #### 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities (2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non‑chosen subsidiary) is worked out in a special way. (b) for each sub‑group (see subsection (6)) that exists in relation to the non‑chosen subsidiary—the sub‑group’s notional allocable cost amount (see subsection(5)) for the non‑chosen subsidiary. (4) The head company adjusted allocable amount for the non‑chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if; (b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of head company’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub‑group in relation to the non‑chosen subsidiary. (5) For each sub‑group that exists in relation to the non‑chosen subsidiary, there is a sub‑group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non‑chosen subsidiary if: (a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non‑chosen subsidiary and the entities comprising the sub‑group; and (c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub‑group membership interests (see subsection (6)) in relation to the sub‑group, and any such entity held those membership interests during the period when it actually held them; and (d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of chosen transitional entity’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub‑group. (6) If a chosen transitional entity holds membership interests in a non‑chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non‑chosen subsidiary: (a) the chosen transitional entity and each interposed non‑chosen subsidiary comprise a sub‑group in relation to the non‑chosen subsidiary (unless the non‑chosen subsidiary is included in a sub‑group in relation to another non‑chosen subsidiary); and (i) the membership interests that the chosen transitional entity holds directly in the non‑chosen subsidiary or in any of the interposed non‑chosen subsidiaries; (ii) the membership interests that each interposed non‑chosen subsidiary holds directly in the non‑chosen subsidiary or in any of the other interposed non‑chosen subsidiaries. #### 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities If any provision of the Income Tax Assessment Act 1997 would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply. > Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred. (1) This section has effect for the purposes of applying section 705‑70 (step 2 of allocable cost amount) of the Income Tax Assessment Act 1997 in relation to a transitional entity. (2) In spite of subsection 705‑70(1A) of that Act, if the amount of an accounting liability of the transitional entity would be different when it becomes an accounting liability of the transitional group, that difference is not taken into account in working out the amount of the liability. #### 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different (a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset (the roll‑over asset) for which there was: (ii) roll‑over relief under section 40‑340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and (i) became an asset of the head company when the transitional group came into existence because subsection 701‑1(1) (the single entity rule) of that Act applies; or differs at that time from what it would have been if the act, transaction or event that gave rise to the CGT event had not occurred in relation to the roll‑over asset; then the provisions mentioned in subsection (2) apply as if the act, transaction or event had not occurred in relation to the roll‑over asset. (a) the act, transaction or event mentioned in subsection (1) happened before a demerger and in connection with the demerger; and (b) before the transitional group came into existence, at least one of the following entities ceased to be a member of the demerger group because of the demerger: (i) the originating company in relation to the roll‑over, or the transferor in relation to the roll‑over relief, was a foreign resident; and (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as a transitional foreign‑held subsidiary of the group. #### 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets (1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied. (2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset. (a) the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and (b) former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset. (4) The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group. (6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses. #### 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets (b) just before the transitional group came into existence, the entity that became the head company held a pre‑CGT asset; and (d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre‑CGT asset and is held by the head company only because the entity is taken by subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company. (2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence. #### 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity (1) This section provides for an addition to the step 1 amount for working out under section 711‑20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity) that ceases to be a subsidiary member of the transitional group at a time (the leaving time), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701‑1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount for paragraph</span><span> </span><span>(2)(c)</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">If, because of the circumstances described in paragraphs</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(a) and (b):</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">The amount is:</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:180.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following provisions applied to the entity:</span></p><p class="Tablea"><span>(a) former section</span><span> </span><span>61A of the </span><span style="font-style:italic">Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(b) former Subdivision</span><span> </span><span>57</span><span>‑</span><span>I in Schedule</span><span> </span><span>2D to the</span><span style="font-style:italic"> Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(c) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(4) of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td><td style="width:148.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the amount treated as being the cost of the asset under that provision; and</span></p><p class="Tablea"><span>(b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>2</span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following subsections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span><span> applied to the entity:</span></p><p class="Tablea"><span>(a) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(5);</span></p><p class="Tablea"><span>(b) 58</span><span>‑</span><span>70(3)</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The amount treated as being the cost, or the first element of the cost, of the asset under that subsection</span></p></td></tr></tbody></table> ``` (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997, as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="4" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amounts and provisions for different dates of acquisition</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Date of the acquisition</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Amount</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Provision of Division</span><span style="font-weight:bold"> </span><span style="font-weight:bold">58 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> applying to the acquisition and the working out of the amount</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:76.7pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>160</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>220</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>After 30</span><span> </span><span>June 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>First element of the cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subsection</span><span> </span><span>58</span><span>‑</span><span>70(5)</span></p></td></tr></tbody></table> ``` > Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. > Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and ### Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: #### 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70‑45 to 70‑70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420‑51 to 420‑58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (a) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority‑owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority‑owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority‑owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority‑owned entity became a subsidiary member of the group, there was roll‑over relief under section 40‑340 of the Income Tax Assessment Act 1997. (a) while the asset is, because subsection 701‑1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, its tax cost setting amount is taken to be equal to the continuing majority‑owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711‑30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997. (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset becomes that of an entity (a new asset holder) other than the head company because subsection 701‑1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder) acquiring some or all of the membership interests in the new asset holder; and (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset is acquired by another entity (a new asset holder) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll‑over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value asset just before the acquisition; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 #### 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 (b) members of the consolidated group or the MEC group mentioned in subsection 104‑500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701‑1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701‑1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (3) If this section applies, neither subsection 104‑500(4) nor subsection 104‑500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year. ### Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C‑B); and (b) modifies certain rules in Part 3‑90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C‑C). > Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719‑2 and 719‑10 of this Act). 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership #### 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(ii) of that Act (see subsection 719‑2(3) of this Act). (b) a trust (a non‑resident trust) that does not meet the requirements in any item of the table in section 703‑25 of the Income Tax Assessment Act 1997. (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non‑resident company or a non‑resident trust; or Test entity must be a subsidiary member on assumption that non‑resident companies and non‑resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non‑resident company or non‑resident trust were a subsidiary member of the group. (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv). #### 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(iii) of that Act (see subsection 719‑2(3) of this Act). (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C‑10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3). If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C‑10 are met; and (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (ii) an entity that is a transitional foreign‑held indirect subsidiary of the group because of another application of this paragraph; Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign‑held indirect subsidiary would need to have satisfied the set of requirements in either section 701C‑10 or 701C‑15 (1) This Subdivision applies if an entity (the transitional foreign‑held joining entity) that is a transitional foreign‑held subsidiary or a transitional foreign‑held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time) the group comes into existence. (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign‑held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign‑held indirect subsidiary that becomes a subsidiary member at that time takes account of this. (a) section 701‑10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); apply, for the purposes of setting the tax cost of an asset of the transitional foreign‑held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign‑held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. > Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign‑held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign‑held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign‑held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign‑held subsidiary and the other entity. > Note 2: If the transitional foreign‑held joining entity is a transitional foreign‑held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705‑A of the Income Tax Assessment Act 1997, in its application in accordance with Subdivision 705‑B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company. Subsection 701‑35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax‑neutral amount) does not apply to the assets of the transitional foreign‑held joining entity if it is a transitional foreign‑held subsidiary. Section 701‑15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: (a) this section applies to each membership interest in the transitional foreign‑held subsidiary that is held by an entity (an eligible non‑resident) of a kind mentioned in subparagraph 701C‑20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign‑held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701‑1(2) of the Income Tax Assessment Act 1997 applies to the eligible non‑resident in the same way as it applies to the head company. Section 711‑5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: > Note: If the leaving entity is a transitional foreign‑held subsidiary (within the meaning of section 701C‑20 of the Income Tax (Transitional Provisions) Act 1997), this Division will, in accordance with subsection 701‑15(4) of this Act (see section 701C‑40 of the first‑mentioned Act), apply to membership interests that an eligible non‑resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity. (1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707‑C of the Income Tax Assessment Act 1997. (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period. (1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if: (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (d) the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997. (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: (1) The head company of a consolidated group may make a choice in the approved form to apply section 701D‑10 to another entity. (2) However, the head company cannot make that choice if subsection 701D‑10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (a) an asset of the head company because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701‑55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40‑77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40‑77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40‑285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount. (b) after the asset became an asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). > Note: The final entity will be different from the head company if an entity (the leaving entity) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40‑285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. > Note: The final entity will be entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701‑5 (the entry history rule) of that Act and perhaps also section 701‑40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity) became a subsidiary member of the group; and It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). > Note: In some cases, section 705‑47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40‑285(3) of this Act. If: (b) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and subsection 40‑285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701‑10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997. > Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997. (1) For the purposes of Part 3‑90 of the Income Tax Assessment Act 1997, this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960‑G of that Act whether the interest or right is a membership interest of the entity in the other entity. > Note: Under Subdivision 960‑G of the Income Tax Assessment Act 1997, a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001) apply to transactions in relation to the interest or right at the relevant time. Despite the amendments of section 703‑35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) If an entity (the joining entity) to which section 40‑75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time), this Subdivision applies in relation to: (ii) became assets of the head company of the group at the joining time because of section 701‑1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure. (1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). (2) If the joining entity could not deduct an amount under Subdivision 40‑B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701‑55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40‑35, 40‑37, 40‑40 or 40‑43 treated the joining entity as holding a notional asset. > Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705‑30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. (a) deductions under former Subdivision 330‑A, 330‑C or 330‑H of the Income Tax Assessment Act 1997, or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated an entity as holding because of the expenditure. (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); > Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40‑75(4) of this Act, but may have been reset since under Subdivision 40‑B of the Income Tax Assessment Act 1997. > Note 2: The effective life of a notional asset is specified by whichever one of sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act is relevant to the notional asset. (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (9) Section 705‑55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705‑45 of that Act. > Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705‑40 of the Income Tax Assessment Act 1997. (a) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701‑5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. > Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705‑305(3). (ii) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707‑A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member. 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value #### 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707‑320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor) other than the real loss‑maker mentioned in subsection 707‑315(1) of that Act for the bundle; and (b) both the real loss‑maker and the value donor became members of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (ca) neither the real loss‑maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (ii) a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (ii) section 713‑540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (2) It must have been possible for the real loss‑maker to have transferred the loss to the value donor under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss‑maker at the initial transfer time the amount worked out using the formula:  > Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707‑327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss‑maker to the transferee. > total of real loss‑maker’s non‑foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss‑makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) included in a bundle of losses: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. #### 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value (1) This section affects the calculation of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707‑325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936, in the bundle). > Note: This section does not affect the calculation of the real loss‑maker’s modified market value for other purposes (such as the real loss‑maker being a value donor for the purposes of another application of section 707‑325 of this Act). (3) One condition is that the event was an injection of capital directly into the real loss‑maker by the value donor mentioned in section 707‑325 of this Act. (c) that would have caused subsection 707‑325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss‑maker’s modified market value (even if no other events described in subsection 707‑325(4) of that Act had occurred), apart from this section. (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss‑maker (whether or not the event also involved either the value donor or the real loss‑maker); or (1) This section has effect for the purposes of working out under Subdivision 707‑C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707‑325, as if there were added to the modified market value of the real loss‑maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (c) the loss is not a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707‑A of that Act at the initial transfer time had the company: > Note: This section has effect even if the amount added to the real loss‑maker’s modified market value under section 707‑325 is nil because the value donor’s modified market value is nil. (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707‑325, as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (4) If the transferee mentioned in subsection 707‑325(1) chooses, sections 707‑310, 707‑335 (except paragraph 707‑335(2)(a)) and 707‑340 of the Income Tax Assessment Act 1997 (and subsections 707‑315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: > Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707‑325(1)(d) and (e) and subsection 707‑325(2) in an application of section 707‑325 separate from the application of that section mentioned in paragraph (1)(a) of this section. > Note: This means that a loss that provided a basis for section 707‑325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. (b) in connection with the requirement that it must have been possible for a company (the notional transferor) to transfer to another company (the notional transferee) for an income year a loss under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997. (b) ends immediately after the initial transfer time mentioned in subsection 707‑320(1) of the Income Tax Assessment Act 1997. > Note: For the purposes of identifying the trial year using the definition in section 707‑120 of the Income Tax Assessment Act 1997, the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time. (1) Subsection (3) of this section affects the calculation, under section 707‑325 of the Income Tax Assessment Act 1997 and section 707‑325 of this Act, of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (the formation time) the group became a consolidated group; and (b) the provisions described in subsection 707‑327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707‑327(1)(b) and (c) of this Act as if the bundle included the loss; and (d) subsection 707‑325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707‑325(1) of this Act chooses that this section apply in relation to the real loss‑maker. (2) Section 707‑325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. (3) Disregard for the purposes of subsection 707‑325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707‑325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or > Note: Disregarding such an event could have a direct or indirect effect on the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss‑maker’s modified market value calculated under section 707‑325 of the Income Tax Assessment Act 1997, if the real loss‑maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707‑325 of this Act to add an amount to the real loss‑maker’s modified market value for those purposes. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) that: (b) was transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from an entity other than the real loss‑maker. (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997. Disregard an event that is described in subsection 707‑325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707‑325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004. (1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss‑maker) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time) the transferee became the head company of a consolidated group; and (ii) the conditions in one or more of paragraphs 165‑15(1)(a), (b) and (c) did not exist in relation to the real loss‑maker; and (da) the real loss‑maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non‑transferred losses) of the same sort that the transferee made without a transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non‑transferred losses). (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. <table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Limit on utilising the losses</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For this income year:</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the losses that the transferee may utilise cannot exceed:</span></p></td></tr></thead><tbody><tr><td style="width:20.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:120.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The first income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span style="font-size:8pt; vertical-align:2pt">1</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The second income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) </span><span style="font-size:8pt; vertical-align:2pt">2</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the amount of the losses utilised for the income year mentioned in item</span><span> </span><span>1</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The third income year ending after the initial transfer time, or a later income year</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time</span></p></td></tr></tbody></table> ``` (4) Subdivision 707‑C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707‑A of that Act. > Note: This has 2 effects. First, Subdivision 707‑C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707‑A of that Act). (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). (7) This section does not limit the transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company. In working out when a choice may be made under subsection 707‑325(5), 707‑327(5), 707‑328A(4) or 707‑350(5), ignore losses to which section 713‑535 of the Income Tax Assessment Act 1997 applies. > Note: That section deals with losses transferred under Subdivision 707‑A of that Act from certain wholly‑owned subsidiaries of life insurance companies that are members of a consolidated group. Section 707‑405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act. (1) This section reduces the adjustable value of a notional asset that section 40‑35, 40‑37, 40‑38, 40‑40 or 40‑43 treats the head company of a consolidated group as holding, if: (b) that section treats the leaving entity as holding a notional asset because of section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997. > Note: Section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time. The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences. (1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event) happening involving an entity (the originating entity) and another entity (the recipient entity) if: (a) the event occurs in connection with a life insurance company (the member life insurance company) becoming a member of a consolidated group; and (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest) in a company or in another trust. (a) a life insurance company transfers an asset (also the original asset) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320‑200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset) to its segregated exempt assets where, apart from this Subdivision, section 320‑255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event) is made in connection with the life insurance company (also the member life insurance company) becoming a member of a consolidated group. (1) This Subdivision applies only if the originating entity (for a section 713‑505 case) or the life insurance company (for a section 713‑510 case) chooses that it apply. (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713‑510 of the Income Tax Assessment Act 1997; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713‑510 of the Income Tax Assessment Act 1997; and (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs. This Act, and the Income Tax Assessment Act 1997, apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group. (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain) that the originating entity would have made as a result of the deferral event is disregarded; and (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount) under paragraph 320‑15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (1) This section operates if, after the deferral event happens, another event (the new event) happens where the new event is: (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (i) the original asset being transferred to or from the company’s virtual PST under section 320‑180, 320‑185 or 320‑195 of the Income Tax Assessment Act 1997; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320‑235, 320‑240 or 320‑250 of that Act; or (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. > Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713‑505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (1) For a section 713‑505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713‑535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: (a) an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group at a time (the leaving time); and (b) but for the cessation of membership and section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision. Sections 716‑340 and 716‑345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. <table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:345.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Extended operation of sections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 1</span><br><span style="font-weight:bold">Sections</span><span style="font-weight:bold"> </span><span style="font-weight:bold">716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">340 and 716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">345 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> operate in relation to:</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 2</span><br><span style="font-weight:bold">In the same way as they operate in relation to:</span></p></td></tr></thead><tbody><tr><td style="width:5.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:161.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>46</span><span>‑</span><span>90 of that Act</span></p></td><td style="width:156.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>40</span><span>‑</span><span>455 of that Act</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software pool created under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure allocated to a software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Software, expenditure on which was in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>In</span><span>‑</span><span>house software, expenditure on the development of which is allocated to a software development pool</span></p></td></tr></tbody></table> ``` (1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: Section 703‑30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004. (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time) a wholly‑owned subsidiary of the entity that became the head company of the group (the head entity), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier‑1 company of the group at the formation time. Despite the amendment of section 719‑30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) Section 719‑160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719‑160(3) of the Income Tax Assessment Act 1997. (3) However, that effect of section 719‑160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division. (2) Paragraphs 701‑1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier‑1 company at the time the MEC group came into existence. (a) the entity and one or more other entities were members of a potential MEC group as eligible tier‑1 companies, throughout the period: (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier‑1 company, at the time the transitional group came into existence. To avoid doubt, sections 707‑325 and 707‑327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719‑305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707‑A of that Act. Subsection 719‑325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006. (1) A reference in an agreement to item 25 of the table in subsection 721‑10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: (1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: Division 725 applies to a scheme entered into on or after 1 July 2002. It also applies to a scheme entered into on or after 27 June 2002, but only if: ### Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (1) Division 727, as inserted by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 and amended by the New Business Tax System (Consolidation and Other Measures) Act 2003, applies to a scheme entered into on or after 1 July 2002. (b) a presumed indirect value shift that happens under the scheme and affects a realisation event that happens on or after 1 July 2002. (a) the economic benefits taken into account in determining that the scheme has resulted in that indirect value shift or presumed indirect value shift include economic benefits provided by: > Note: In that case, the consequences of the trigger event are worked out under Division 138 or 139 of the Income Tax Assessment Act 1997: see items 13 and 14 of Schedule 15 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002. (1) An indirect value shift does not have consequences under Division 727 of the Income Tax Assessment Act 1997 if, to the extent of at least 95% of their total market value, the greater benefits consist entirely of: (a) a right to have services that are covered by section 727‑240 of that Act provided directly by the losing entity to the gaining entity; or (d) if the losing entity’s 2002‑2003 income year ends before 30 June 2003—the start of the losing entity’s 2004‑2005 income year. (2) For the purposes of section 727‑850 (about a presumed indirect value shift affecting a realisation event) of the Income Tax Assessment Act 1997, subsection (1) of this section applies to the presumed indirect value shift: #### 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (2) Paragraph 727‑470(2)(a) of the Income Tax Assessment Act 1997 (as in force immediately before the commencement of this section) continues to have effect in relation to the indirect value shift as if the repeals and amendments made by Schedule 1, Parts 1 and 2 of Schedule 3 and Schedule 8 to the Tax Laws Amendment (Small Business) Act 2007 had not been made. ## 701C‑30 Transitional foreign‑held subsid 701C‑30 Transitional foreign‑held subsidiary to be treated as part of head company (a) section 701‑10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); apply, for the purposes of setting the tax cost of an asset of the transitional foreign‑held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign‑held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. > Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign‑held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign‑held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign‑held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign‑held subsidiary and the other entity. > Note 2: If the transitional foreign‑held joining entity is a transitional foreign‑held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705‑A of the Income Tax Assessment Act 1997, in its application in accordance with Subdivision 705‑B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company. ## Other modifications Other modifications (a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and (2) Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001 (the new Act) applies to the plant on this basis: (a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant’s opening adjustable value; and (b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and (c) if you excluded an amount from your assessable income under section 42‑290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999—the cost of the plant, and its opening adjustable value, are reduced by that amount; and (d) if subparagraph (1)(b)(ii) applies to you—you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi‑owner of the plant under the former Act continue. (3) If you were using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis: (a) for the diminishing value method—replace the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate you were using; and (i) replace the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate you were using; and (ii) increase the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note 1: Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced. > Note 2: Small business entities can choose to work out the decline in value of their depreciating assets under Division 328. (a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or (3) If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40‑70(1) or 40‑75(1) of the new Act that includes the plant’s effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and (2) For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets. (3) For a case where the plant is merged into another depreciating asset, section 40‑125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it. (b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and (a) you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and (b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU’s opening adjustable value. (1) Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001. (2) For a unit of software for which you were deducting amounts under Subdivision 46‑B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis: (d) you must use the same effective life you were using under Subdivision 46‑B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001. (1) This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day. (b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and (c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and (1) This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001. > Note: Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8). (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330‑80 of the former Act for your income year ending on 30 June 2001; and (c) in applying the formula in section 40‑75 of the new Act for the income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The remaining effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these: (i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and (ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (7) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and (b) the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of expenditure incurred in carrying on eligible quarrying operations—the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (i) you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day) after 30 June 2001; or (ii) the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day) after 30 June 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which the start day occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year. there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (1) This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330‑H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and (c) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (i) any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset); (i) any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (4) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (4) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (b) the expenditure would have been transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330‑H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for your income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (1) Despite subsections 40‑35(5), 40‑38(5) and 40‑40(4), there is no additional decline in the value of the notional asset referred to in those subsections if: (a) apart from this section, subsection 40‑35(5), 40‑38(5) or 40‑40(4) would apply because the real asset referred to in that subsection is disposed of; and (a) at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373‑35 of the former Act; and (b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day. (a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and (1) Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time). (2) Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time. (a) you have deducted or can deduct an amount under Subdivision 387‑G of the former Act for an amount (the qualifying amount) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and (b) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and (1) This section applies to you if you have deducted or can deduct an amount under Subdivision 400‑A of the former Act for an amount (the qualifying amount) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400‑A of the former Act. (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and (c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400‑15(3) of the former Act; and (1) Units of plant that you had allocated to a pool under Subdivision 42‑L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act. (a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and (c) in applying the formula in section 40‑70 of the new Act for your income year in which 1 July 2001 occurs—it has a base value equal to that opening adjustable value; and (d) you replace the component in the formula in subsection 40‑70(1) of the new Act that includes an asset’s effective life with the pool percentage you were using for the pool; and (e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40‑115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and (f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset. (3) An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item). > Note 1: You work out the decline in value of an item removed under this subsection under Subdivision 40‑B of the new Act, using the cost for it worked out under section 40‑205 of the new Act. (b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset. (2) The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year) in this way: (a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and (b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section. (a) for a unit of plant (including IRUs and expenditure on software that is not pooled)—its undeducted cost at the end of 30 June 2001; or (b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence—the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or (c) for transport capital expenditure—the entity’s amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or (d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (e) for expenditure on evaluating the impact on the environment of a project—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (f) for assets that were pooled under Subdivision 42‑M or 42‑L of the former Act—the closing balance of the pool at the end of 30 June 2001. (4) The asset’s base value for applying the formula in section 40‑70 of the new Act for the diminishing value method is that opening adjustable value. (5) The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an item of plant for which you were using the prime cost method—using the rules in section 40‑10 of this Act; and (c) for a unit of software for which the entity was deducting amounts under Subdivision 46‑B of the former Act—using the rules in subsection 40‑25(2) of this Act; and (f) for an amount of expenditure on evaluating the impact on the environment of a project—using the rules in section 40‑55 of this Act. (6) The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an amount of unrecouped expenditure under Division 330 of the former Act—using the rules in section 40‑35 of this Act; and (b) for an amount of transport capital expenditure under Division 330 of the former Act—using the rules in section 40‑40 of this Act; and (7) The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act. (a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑C of the former Act; or (b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑H of the former Act; or (c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387‑B of the former Act; or (d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; or (e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365. (9) The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001. (10) You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount). (11) You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount. (1) Subsections 40‑65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened: (b) you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act. (a) paragraph 40‑65(6)(a) of the Income Tax Assessment Act 1997 included both events set out in subsection (1) of this section; and (b) subsections 40‑65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events. (1) A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936. (2) An amount you have deducted or can deduct for a water facility under Subdivision 387‑B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40‑F of the new Act. (3) A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936. (a) you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40‑115 (about splitting a depreciating asset) or 40‑125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and (b) it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40‑72 of that Act; (2) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if: (c) it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40‑72 of that Act. (3) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset) before 10 May 2006 if: (b) the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and (d) it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40‑72 of that Act. (a) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you: (b) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001. (2) If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act. (3) Otherwise, Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section. (a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or (b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or (ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life. (1) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001. > Note: If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40\. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997. (1A) Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001. (1B) Subsection (1) applies to a mining, quarrying or prospecting right (the new right) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if: (i) the other company is a member of the same wholly‑owned group as the original holder and was a member of that group just before that day; and (ii) the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer. (1D) Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if: (b) the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001. (a) you acquired, under an interest realignment arrangement, an interest (a new interest) in a mining, quarrying or prospecting right; and (b) the interest was acquired in exchange for one or more other interests (old interests) in other mining, quarrying or prospecting rights; and Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001. (a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or (b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership; the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act. (3) An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that: (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act. (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act. (6) Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243. (7) An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if: (a) you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and (8) The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section. (c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act. (2) Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001. A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act. if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011. (2) The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011. (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset for an income year is the amount worked out under section 40‑130 if: (a) the income year is the year in which you start to use the asset, or have it installed ready for use, for a taxable purpose; and (b) subsection (2) (about businesses with turnover less than $500 million) applies to you for the year and for the income year in which you started to hold the asset (if that was an earlier year); and > Note 1: An effect of paragraph (1)(a) is that this Subdivision only applies to one income year per asset. See also subsection 40‑135(1). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $500 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. Exception—assets for which the decline in value is worked out under section 40‑82 or Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (3) However, this section does not apply to a depreciating asset for an income year if you work out the decline in value of the asset for the income year under any of the following: (1) For the purposes of paragraph 40‑120(1)(c) and section 328‑182, you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you: > Note: Section 328‑182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997. (i) entering into a contract under which you hold the post‑12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑12 March 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post‑12 March 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (8) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (9) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (10) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (1) For the purposes of section 40‑120, the decline in value for the income year in which paragraph 40‑120(1)(a) is satisfied (the current year) is: > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 12 March 2020 to 30 June 2020 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2020 to 30 June 2021. (a) 50% of the asset’s cost as at the end of the current year, disregarding any amount included in the second element of the asset’s cost after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997, assuming its cost were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (3) However, the amount worked out under subsection (2) for an income year cannot be more than the amount that is the asset’s cost for the year. (a) 50% of the sum of the asset’s opening adjustable value for the current year and any amount included in the second element of its cost for that year, disregarding any amount included in that second element after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997 assuming: (ii) for the prime cost method—the component “Asset’s \*cost” in the formula in subsection 40‑75(1) of that Act (as adjusted under that section) were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (b) for the prime cost method—the sum of its opening adjustable value for the income year and any amount included in the second element of its cost for that year. (1) The decline in value of a depreciating asset is not worked out under this Subdivision for an income year if this Subdivision already applied in working out the decline in value of the asset for an income year. (2) For an income year later than the year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (3) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (4) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) You may choose that the decline in value of a particular depreciating asset for an income year, and subsequent income years, is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the first income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. If this Subdivision applies to work out the decline in value of a depreciating asset you hold for an income year, no other provision of this Act or the Income Tax Assessment Act 1997 applies to work out that decline in value. (1) For the purposes of this Subdivision, you are covered by this section for a depreciating asset if, on or before 30 June 2023: (2) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (3) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or Exception—assets for which the decline in value is worked out under Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (a) the asset is allocated to a low‑value pool, or expenditure on the asset is allocated to a software development pool (see Subdivision 40‑E of the Income Tax Assessment Act 1997); or (b) you or another taxpayer has deducted or can deduct amounts for the asset under Subdivision 40‑F of the Income Tax Assessment Act 1997 (about primary production depreciating assets). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $5 billion; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this section. (ii) if the 2019‑20 income year ends on or before 6 October 2020—the sum of your ordinary income (if any) and statutory income (if any) for the 2019‑20 income year; and (c) the sum of the amounts worked out under subsection (3) for the 2016‑17, 2017‑18 and 2018‑19 income years exceeds $100 million. (b) next, work out the cost of each of those assets (including any amounts included in the second element of the asset’s cost at a time that is in the income year); (4) For the purposes of subsection (3), disregard an asset if, at the time you first used the asset, or had it installed ready for use, for a taxable purpose: (a) it was not reasonable to conclude that you would use the asset principally in Australia for the principal purpose of carrying on a business; or (5) For the purposes of paragraph (3)(b), to work out the cost of a depreciating asset that is capital works (see section 43‑20 of the Income Tax Assessment Act 1997): (a) disregard section 40‑45 of that Act and work out the cost of the capital works using Subdivision 40‑C of that Act; and (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under subsection (3) if: (a) where section 40‑155 covers you for the current year (regardless whether section 40‑157 also covers you for the current year)—an exclusion applies to you and the asset for the current year under section 40‑165 (about exclusions for businesses with turnover of $50 million or more); or (ii) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s start time occurs in the current year—the asset’s cost as at the end of the current year, disregarding any amount included in the asset’s cost after 30 June 2023; or (b) if the asset’s start time occurred in an earlier year—the sum of its opening adjustable value for the current year and any amount included in the second element of its cost for the current year, disregarding any amount included in the asset’s cost after 30 June 2023. > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 6 October 2020 to 30 June 2021 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2021 to 30 June 2022. (a) where paragraph 40‑160(2)(a) applies—section 40‑155 would not cover you for the income year if the reference in that section to $5 billion were instead a reference to $50 million; and (i) entering into a contract under which you hold the post‑6 October 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑6 October 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of satisfying paragraph 40‑160(1)(a) for the post‑6 October 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you already satisfied paragraph 40‑160(1)(a) of this Act for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (9) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (1) For the purposes of subsections 40‑160(2) and 40‑170(1A), an exclusion applies to you and an asset for an income year if any of the exclusions in this section applies in relation to the asset. (4) This exclusion applies in relation to the asset if the asset is available for use, at any time in the income year, by any of the following: (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under this section if: (ii) you started to use the asset, or have it installed ready for use, for a taxable purpose in an earlier income year; and (b) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under section 40‑82 of the Income Tax Assessment Act 1997—the amount worked out under subsection (3); or (b) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under Subdivision 40‑BA of this Act—the amount worked out under subsection (4); or Assets affected by section 40‑82 of the Income Tax Assessment Act 1997 (about assets costing less than $150,000, medium sized businesses) (a) the amount that would be the asset’s decline in value for the year under section 40‑82 of the Income Tax Assessment Act 1997, assuming the reference in subparagraph 40‑82(3A)(b)(ii) of that Act to 31 December 2020 were instead a reference to the 2020 budget time; and (a) the amount that would be worked out under paragraph 40‑130(2)(a) or (4)(a) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(a) and (4)(a) to 30 June 2021 were instead references to the 2020 budget time; and (c) the amount that would be worked out under paragraph 40‑130(2)(b) or (4)(b) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(b) and (4)(b) to “the amount worked out under paragraph (a)” were instead references to “the amounts worked out under paragraphs 40‑170(4)(a) and (b)”. (a) the amount that would be the asset’s decline in value for the year under Division 40 of the Income Tax Assessment Act 1997, disregarding any amounts included in the eligible second element worked out under section 40‑175 of this Act for the asset for the year; and The amount worked out under this section (the eligible second element) for a depreciating asset for an income year is the sum of any amounts included in the second element of the asset’s cost at a time that is in both of the following periods: (1) For an income year later than a year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (2) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (3) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) This section applies if the decline in value for a depreciating asset for an income year is worked out under this Subdivision, and at a time (the balancing adjustment time) in a later income year: (i) it becomes not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (b) none of the requirements in paragraphs 40‑295(1)(a), (b) or (c) of the Income Tax Assessment Act 1997 are satisfied in relation to the asset. (2) For the purposes of Subdivision 40‑D of the Income Tax Assessment Act 1997 assume that, at the balancing adjustment time, you stop using the asset, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again. (3) For the purposes of section 40‑180 of the Income Tax Assessment Act 1997 assume that the reference in item 3 of the table in subsection 40‑180(2) of that Act to “because you stop using it for any purpose expecting never to use it again” were instead a reference to “because of section 40‑185 of the Income Tax (Transitional Provisions) Act 1997”. (4) If a balancing adjustment event happens to a depreciating asset you hold because of this section, this Subdivision cannot apply to work out the decline in value of the asset for a later income year. (1) You may choose that the decline in value of a particular depreciating asset for an income year is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year. (1) Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40. (a) you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset: (ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and (4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day. (5) The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if: (i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or (ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and  > sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose. (7) Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens: (a) if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b). (i) an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and (ii) the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and (3) The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount. (a) on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and (c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and (ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal; (2) There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal. (3) Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount. If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997. (a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and (b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and: (i) the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, the R&D entity is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—a clawback amount under section 355‑447 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑466 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. (b) section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions. > Note 2: The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and: (i) the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset; (ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, an R&D entity (the partner) that is a partner in the R&D partnership and is entitled to one or more new law deductions for one or more income years for the asset, is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—a clawback amount under section 355‑449 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑468 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s new law deductions mentioned in paragraph (2)(b) of this section. (4) Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event. > Note: Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions. (1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant. (b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and (3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it. (a) there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and (b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act. (2) The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor. (3) The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and <table cellspacing="0" cellpadding="0" style="width:364.2pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:353.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading" style="page-break-inside:avoid"><span>Conditions for small business taxpayers retaining accelerated rates</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Condition</span></p></td></tr></thead><tbody><tr><td style="width:21.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:321.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>The transferee must have been a small business taxpayer for the income year (the </span><span style="font-weight:bold; font-style:italic">start year</span><span>) that includes the time when the entity first used the plant, or first had it installed ready for use.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>2</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>At that time, neither of these applies:</span></p><p class="Tablea"><span>(a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;</span></p><p class="Tablea"><span>(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection</span><span> </span><span>(5).</span></p></td></tr></tbody></table> ``` (4) For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership. (5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement. (a) for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or (i) replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and (ii) increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).  (b) if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11). (c) that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and (d) that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and (e) that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity. (a) for taxable supplies (if any) the entity makes during the year in the course of carrying on a business—the value (as defined by section 9‑75 of the GST Act) of the supplies; and (b) for other supplies the entity makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies. (1) The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for: (a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (c) for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or (d) for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant. (3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115. (4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain. (5) Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee. (i) the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or (a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and (1) A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act. (2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year. For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if: Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act. (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset): and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply. (i) for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or (ii) for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and (c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act. (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and (2) Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act. The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under: (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on: (2) You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act. (3) A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under: (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and (2) Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act. A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act. The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001. If: (d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act; (a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and (a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and (b) the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and (c) paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997. Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years. (1) For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section. (b) the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (b) that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (1) There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea" style="page-break-after:avoid"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a); and</span></p><p class="Tablea" style="page-break-after:avoid"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (b) disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (f) an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division. (4) If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45‑5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest. (5) If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45‑10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest. Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Disregard the use of the following amounts in determining (for the purposes of Subdivision 50‑A of the Income Tax Assessment Act 1997 whether a fund established before 1 July 1997 operates and pursues its purposes in Australia: Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years. (2) However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date. Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if: (b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time. Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years. 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years (1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act. <table cellspacing="0" cellpadding="0" style="margin-left:56.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:258.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Application provisions for specific sections</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-size:9pt; font-weight:bold">Item</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">This section of the </span><span style="font-size:9pt; font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-size:9pt; font-weight:bold"> ...</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">Applies as described in this provision of this Act ...</span></p></td></tr></thead><tbody><tr><td style="width:24.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55(1)</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>95</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>8</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td></tr></tbody></table> ``` (a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and (b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997. > Note: Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year. (b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997; sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997). > Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock. (3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997. (a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and (b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936; > Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal. #### 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997. (1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year. (2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936. (3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year: (a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners; (b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed. > Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year. > Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year. (b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year; the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year. (2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. (3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2). #### 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997. #### 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business (1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. (2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity. > Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997. (1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. (2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value. > Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997. #### 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year. (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. > Note: Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. > Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given). (5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act). (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment. > Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%. (5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%. (6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.  > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section. (b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4). Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age. Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later. Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies. Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3. (4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997. (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%. > Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986. (5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D. > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. (a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and (b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year). (3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and (2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual: (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income. > Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F. > Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997. > Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997. #### 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 (1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012. (2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies. (3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act. (b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009. (2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if: (i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest; (iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or (i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest; (iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009. (2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time. (4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2): (a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and (b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being: (ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and (c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and (d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if: (i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or (ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and (e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and (i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and (ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and (g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest. (a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced: (i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or (ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and (b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5. (2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right. (3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right. (2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. (3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section. Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years. (1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision. > Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision). > Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936). > Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997. (a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936. (1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936. (2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997. > Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997. (3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and (d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; (f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time. > Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and (d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015. (a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or (4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if: (b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset. The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year. (a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and (1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied: (b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and (d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works). (3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936. Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936. (b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006. (2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement. > Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement. Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual: (b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her. 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act (1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee). (2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year: (3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection. #### 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997. Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936). (2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if: (a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; (a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011); (b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986. > Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section. If: (a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and (b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936; Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995. (1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997. (2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997. (3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997. (4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997. > Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one. Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year: (a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and (b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year; the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation. Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset. (b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section); > Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply. (1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if: (a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and (2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value. (4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value. (a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997. (2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less. (1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936: (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. (1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if: (2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by: (a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or (a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or (2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period. Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year: If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997. (1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002. (2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset. (3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required. (i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and (ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and (c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and (f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997). (a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or (1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:  > total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part. (a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or (2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section. (3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1). (1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences. > Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997. (c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets). (4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act. (5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act. Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement. (a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and (2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time. (a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and (ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs. (2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer. (a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and (b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest; (2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event. (3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly. (4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly. <table cellspacing="0" cellpadding="0" style="width:362.55pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:351.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Creating a CGT asset</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">CGT event number</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Applicable amount</span></p></td></tr></thead><tbody><tr><td style="width:50.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D1</span></p></td><td style="width:290.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the incidental costs the originating company incurred that relate to the CGT event</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D2</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the option</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D3</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the right</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>F1</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred on the grant, renewal or extension of the lease</span></p></td></tr></tbody></table> ``` (5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day. A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision. (a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996. (b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. (b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend. (3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities. (1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company. (2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred. (3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company. (1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of: (2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of: (3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note. (1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised. (b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and (ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act. You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and (b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996. (c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and (c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over. (3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. (a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and (c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and (d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act. (3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division. Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years. A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: (1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day. (2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice. (a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and (b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and (a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and (b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and (c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group. (5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004. (6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection. (1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss): (b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions); and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time: (i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or (e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and (f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and (ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred; (2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if: (a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these: (i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset; (ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and (3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act. (a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and (b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section. (5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of: (a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and (b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset. Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. (ii) that could have been deducted, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the deduction had not been limited by the company’s income for that income year; and (ii) that could have been applied, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the application of the loss had not been limited by the company’s capital gains for that income year. 170‑C Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred #### 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years. #### 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). #### Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997. Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997. If: (a) all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (d) that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and (e) the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place. Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years. > introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament. Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day. #### Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting #### 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B. (1) The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day. (2) No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted. #### 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting (1) Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if: (a) the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and (b) none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount. (2) No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount. (1) This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account. (2) For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. > Note 2: If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60. (3) For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)). (4) For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. (5) The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if: (a) during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and (b) the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section. (a) the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and (b) during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components. (7) For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. (8) Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it: (b) the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component. (9) Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component. (10) For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002: (b) lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination; (c) a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination); (e) the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination); (f) the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination). Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period: 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows: (a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and (i) in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and (ii) in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. > Note: A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002. #### 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002: (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:23.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:87.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A franking surplus</span></p></td><td style="width:220.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.009.png" width="175" height="58" alt="Start formula Amount of the class A franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.010.png" width="190" height="56" alt="Start formula Amount of the class B franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.011.png" width="190" height="56" alt="Start formula Amount of the class C franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` #### 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus): (a) a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Original surplus</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:85.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>class A</span></p></td><td style="width:220.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.012.png" width="169" height="38" alt="Start formula Amount of the original class A surplus times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.013.png" width="169" height="38" alt="Start formula Amount of the original class B surplus times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.014.png" width="169" height="38" alt="Start formula Amount of the original class C surplus times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (4) If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit): (a) a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company. (5) The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking deficit into 1997 Act franking debit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Original deficit</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking debit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(4)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:70.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A</span></p></td><td style="width:235.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.015.png" width="164" height="38" alt="Start formula Amount of the original class A deficit times start fraction 39 over 61 end fraction end formula "></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.016.png" width="164" height="38" alt="Start formula Amount of the original class B deficit times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.017.png" width="164" height="38" alt="Start formula Amount of the original class C deficit times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (2) A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if: (c) the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions. (3) The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if: (b) the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and (1) While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit. (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year. (3) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: > Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act. (1) The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account. (a) a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time; (3) If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if: (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity. #### 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If: the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time. (1) Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections. (2) If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year. Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year. Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year. (5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in: that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement. (6) The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (7) The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (2) The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (3) The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (i) are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and (a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and (b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section. (a) whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and (1) This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002. (a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and (3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded. (1) This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002; (2) If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (3) If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (4) If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. (5) If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows: (a) any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and (i) in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and (ii) in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. #### 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF.  #### 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act). (2) If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus): (a) a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF. (4) If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit): (a) a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF. This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period). (1) The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period: (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (1) The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period. (2) The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner. (3) The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5. (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and (d) the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner; the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received. (3) A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time: (1) A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends. (2) However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period. (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (a) the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed: (d) the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and (e) the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return. (2) The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day. (1) The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period. (2) The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made. Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period. (b) on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax); the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed: (c) the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and (d) the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return. (2) The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day. The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period: If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day. If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and If: (a) a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and (b) the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment; In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment. If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment. The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with. If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953. (1) Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period. (a) the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and (b) the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3); the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on: (c) if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or If: Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax. Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division. If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997. (a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day: (3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002. (a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002: > Note: As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date. (b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997. In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003. (1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year. (a) a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of: (i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time; (iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period; (2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if: (b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time: (ii) the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. > Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. > Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. (7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table: <table cellspacing="0" cellpadding="0" style="width:365.35pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount of the franking credit and the exempting debit</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">If:</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the credit and debit is:</span></p></td></tr></thead><tbody><tr><td style="width:22.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The period starts immediately after 7.30</span><span> </span><span>pm by legal time in the Australian Capital Territory on 13</span><span> </span><span>May 1997</span></p></td><td style="width:141.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Both these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was not in surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>All these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was in surplus at the start of the period;</span></p><p class="Tablea"><span>(c) the surplus in the account at the switch time is greater than the surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the franking surplus in the Australian company’s franking account at the switch time; and</span></p><p class="Tablea"><span>(b) the franking surplus in the Australian company’s franking account at the start of the period</span></p></td></tr></tbody></table> ``` (a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and (b) the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period. Subdivision 235‑I of the Income Tax Assessment Act 1997 applies to assets acquired by the trustee of an instalment trust in: (1) Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years. (2) However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time). (3) The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997. Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997. (2) Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in: (1) Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that: (b) is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose. (a) if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007. > Note: To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997. (b) contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option; the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option. (3) For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5). (4) If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is: (a) the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less (b) the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest. (5) If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is: (6) If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil. (1) If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one. (2) If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year. (3) If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year. (a) for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and (b) for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year: Step 1. Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. Step 2. Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3). Step 3. If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year. > Note: Example: Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75): (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred: (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times: (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate. Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008. (a) the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and (b) the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities: (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (i) the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or (ii) the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and (f) none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made: (i) Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event; (ii) a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year. (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (b) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (c) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year #### 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year (a) the requirements set out in paragraphs 275‑610(1)(a), (b) and (c) of the Income Tax Assessment Act 1997 are satisfied in respect of an amount of non‑arm’s length income of a managed investment trust in relation to an income year; and (b) the managed investment trust became a party to the scheme mentioned in paragraph 275‑610(1)(a) of that Act before the day on which the Bill that became the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 was introduced into the House of Representatives; and Division 276 of the Income Tax Assessment Act 1997 as inserted in that Act by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (the amending Act) applies as set out in subitem 1(1) of Schedule 8 to the amending Act. (b) if the trustee of the trust has made a choice for the purposes of paragraph 1(1)(b) of Schedule 8 to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016—the first income year starting on or after 1 July 2015; or (c) if the trustee of the trust has made a choice for the purposes of subparagraph 276‑10(1)(e)(i) of the Income Tax Assessment Act 1997 in respect of the 2016‑17 income year—that income year. (c) the trust is an AMIT for an income year (the discovery year) that is the starting income year or a later income year. (1) This section applies if the trust has an under or over of a character in the discovery year relating to the base year. (b) if, at a time, the trust sent its members distribution statements for an income year that is prior to the starting income year—assume that the trust sent those members AMMA statements for that income year at that time. (3) For the purposes of Division 276 of the Income Tax Assessment Act 1997, treat the under or over mentioned in subsection (1) as an under or over of the AMIT, in the discovery year relating to the base year, of the character mentioned in that subsection. (a) had the under or over mentioned in subsection (1) been discovered before the starting income year, this Act would have operated to produce a particular effect (the pre‑AMIT scheme effect) for the base year in relation to the amount or amounts reflected in the under or over; and 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT #### 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT (b) working out the amount (if any) of the entity’s capital gain under subsection 104‑70(4) of the Income Tax Assessment Act 1997. (3) For the purpose of working out the amount of the non‑assessable part mentioned in paragraph 104‑70(1)(b), treat the following provisions as being in operation at the time the payment was made: (b) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in paragraph (a). (4) Subsection (3) does not apply to the extent (if any) that the entity, in the income tax return that it lodged for the income year in which the payment was made, included the amount of the payment in its assessable income for that income year. (5) For the purposes of section 118‑20 of the Income Tax Assessment Act 1997, treat this section as being in Part 3‑1 of that Act. (2) The Commissioner cannot amend the entity’s assessment for the income year in which the payment was made in a particular way if: (b) the Commissioner could not amend the assessment in that way if the following provisions were in operation at the time the payment was made: (ii) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in subparagraph (i); and Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82‑10F). (2) The object of this section is to apply (with modifications) provisions limiting deductibility in respect of certain contributions made during the period that: (a) Subdivisions AA and AB of Division 3 of Part III of the Income Tax Assessment Act 1936, as in force just before they were repealed by the Superannuation Legislation Amendment (Simplification) Act 2007; (b) any other provision of the Income Tax Assessment Act 1936, or of any instrument made under that Act, to the extent that it relates to the operation of those Subdivisions; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of those Subdivisions. (b) the deduction limit mentioned in section 82AAC for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (c) the deduction limit mentioned in section 82AAT for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (d) Division 290 of the Income Tax Assessment Act 1997 did not apply to contributions made during the income year mentioned in paragraph (a). (2) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of a defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection and subsection (4), the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 5 September 2006; (b) the defined benefit interest mentioned in paragraph (2)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 5 September 2006, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (2)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (4) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of the defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection, the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 12 May 2009; (b) the defined benefit interest mentioned in paragraph (4)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 12 May 2009, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (4)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (1) The object of this section is to apply (with modifications) provisions relating to excess non‑concessional contributions tax in respect of certain contributions made during the period that: (b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision. (ea) in a case where paragraph 292‑95(1)(b) of that Act would have allowed the contribution mentioned in that paragraph to be made at a time within that period—that paragraph allowed the contribution to be made on or before 30 June 2007; and (f) paragraph 292‑95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and (fa) in a case where subsection 292‑100(2), (4), (7) or (8) of that Act would have allowed the contribution mentioned in that subsection to be made at a time within that period—that subsection allowed the contribution to be made on or before 30 June 2007; and (g) paragraph 292‑100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and (h) contributions made during that period that are covered under section 292‑100 of that Act reduce the person’s CGT cap amount for the 2007‑2008 financial year in accordance with subsection 292‑105(2) of that Act (and despite subsection (1) of that section); and (i) if the conditions in subsection (4) are satisfied—the person’s excess non‑concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and (b) the Commissioner gives the person a transitional release authority under subsection 292‑80A(2) in response to the application; and (c) the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292‑80B within 21 days after the date of the release authority; and (d) the superannuation provider pays the person the amount required under section 292‑80C in relation to the transitional release authority. (b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act). (6) The amount to be included in the first person’s amount of non‑concessional contributions under subparagraph (3)(b)(ii) is the sum of: (a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and (b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made. (c) under Division 295 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)), the contribution is included in the assessable income of the superannuation provider in relation to the superannuation plan to which the contribution is made; and (8) For the purposes of paragraph (7)(b), treat the person as an employee of the other entity if the person would be treated as an employee of the other entity under Division 290 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)). (1) A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007. (2) The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292‑80(3)(b)(i), the person would have excess non‑concessional contributions for the financial year mentioned in paragraph 292‑80(3)(a). (4) For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out: The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 21 days after the date of the release authority. (1) A superannuation provider that has been given a transitional release authority in accordance with section 292‑80B must pay to the person within 30 days after receiving the release authority the least of the following amounts: (a) if the person requests the provider in writing to pay a specified amount in relation to the release authority—that amount; (c) the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person in complying superannuation plans. > Note 1: Section 288‑95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection. > Note 2: Section 288‑100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority. > Note 3: For reporting obligations on the superannuation provider in these circumstances, see section 390‑65 in Schedule 1 to the Taxation Administration Act 1953. (2) The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person in complying superannuation plans. (3) Section 307‑125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section. (a) your non‑concessional contributions cap for the 2015‑2016 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsection 292‑85(7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 applies after the commencement of this section as if: (d) subsection 292‑85(6) of that Act as so amended had been applied (taking into account paragraph (c) of this subsection) for the purposes of working out your non‑concessional contributions cap for the 2016‑2017 financial year. (2) For the purposes of working out your non‑concessional contributions caps for the 2017‑2018 financial year and the 2018‑2019 financial year, if: (a) your non‑concessional contributions cap for the 2016‑2017 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsections 292‑85(6) and (7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 apply after the commencement of this section as if the amount worked out under subsection 292‑85(5) of that Act as so amended were $380,000. (3) To avoid doubt, this section does not affect your non‑concessional contributions cap for any financial year that ended before 1 July 2017. The tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your non‑concessional contributions (see section 292‑90 of the Income Tax Assessment Act 1997) for the financial year. (2) Subject to section 294‑55, the amendments of Division 294 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Treasury Laws Amendment (2017 Measures No. 2) Act 2017 apply on and after 1 July 2017. Despite sections 294‑30 and 294‑140 of the Income Tax Assessment Act 1997 (which are about when you have excess transfer balance), you do not have excess transfer balance in your transfer balance account on any day in the period of 6 months beginning on 1 July 2017 if: (a) the only transfer balance credits in the account in that period arose under item 1 of the table in subsection 294‑25(1) of that Act (which is about superannuation income streams you have just before 1 July 2017); and (b) the sum of those transfer balance credits exceeds your transfer balance cap, but is less than or equal to $1,700,000; and (c) at the end of the period, the sum of all the transfer balance debits arising in your transfer balance account equals or exceeds the amount of the excess from paragraph (b). (1) Despite subsection 294‑10(2), a transfer balance credit arises under item 4 of the table in subsection 294‑25(1) of the Income Tax Assessment Act 1997 only in relation to a borrowing that arises under a contract entered into on or after 1 July 2017. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2017 is treated as if it arose under a contract entered into before 1 July 2017 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) on 1 July 2017, a transfer balance debit arose in your transfer balance account under item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997; and (b) the sum of all the transfer balance credits that arise in your transfer balance account under item 1 of the table in subsection 294‑25(1) of that Act exceeds the amount that would, apart from this section, be the amount of that debit. (2) Despite column 2 of item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997, the amount of the transfer balance debit is instead equal to the sum worked out under paragraph (1)(b) of this section. 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain > The object of this Subdivision is to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the following legislative changes: (a) the introduction of a transfer balance cap (as a result of Schedule 1 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016); (b) the exclusion of transition to retirement income streams (and similar income streams) from being superannuation income streams in the retirement phase (as a result of Schedule 8 to that Act). (a) starting on the start of the day on which the Bill that became the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 was introduced into the House of Representatives; and (a) at the start of the pre‑commencement period, a CGT asset of a fund is a segregated current pension asset of the fund; and (i) at a time (the cessation time) in the pre‑commencement period, the asset ceases to be a segregated current pension asset of the fund; or (ii) at the start of 1 July 2017 (also the cessation time), the asset ceases to be a segregated current pension asset of the fund because it supports a superannuation income stream covered by subsection 307‑80(3) of the Income Tax Assessment Act 1997; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (b) the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year is greater than nil; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and #### 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑115(3)(a), the fund makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the fund’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Subsection 295‑390(1) of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). > 2016‑17 non‑exempt proportion means 1 minus the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year. #### 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset (i) the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997 in respect of the trust for the 2016‑17 income year; (ii) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year; and (d) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and #### 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑125(3)(a), the trust makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the trust’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Section 295‑400 of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). (a) unless paragraph (b) applies—1 minus the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997; or (b) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage worked out by subtracting the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year from 100%. This Subdivision applies to an entity that is the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust. For the purposes of this Subdivision, an asset is a 30 June 1988 asset of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust if the entity owned it at the end of 30 June 1988. > Note: Section 295‑90 of the Income Tax Assessment Act 1997 treats these assets as having been acquired on 30 June 1988. (1) The first element of the cost base of each 30 June 1988 asset of the entity’s is the greater of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). (2) The first element of the reduced cost base of each 30 June 1988 asset of the entity’s is the lesser of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). the market value of the asset as at the end of 30 June 1988 is the average of the highest and lowest trade prices for identical assets recorded on 30 June 1988 in whichever of the following markets is applicable: (d) if, on that date, there was a State capital city market (other than the Sydney market) that recorded a higher volume of trading than the Sydney market in identical assets—that State capital city market; (2) For the purposes of this section, an asset is taken to have been listed on an Australian stock exchange on 30 June 1988 if, and only if, on that day the asset had the status of having been granted official quotation by a securities exchange within the meaning of the former Securities Industry Act 1980 or the law of a State or Territory corresponding to that former Act. (b) at any time during the period commencing at the time when the shares were acquired and ending at the end of 30 June 1988, the company paid an amount that was not a dividend to the entity in respect of the shares; (b) at any time during the period commencing at the time when the interest or unit was acquired and ending at the end of 30 June 1988, the trustee of the trust paid an amount to the entity in respect of the interest or unit, being: (i) in a case where the entity was exempt from tax for the year of income in which the payment was made—an amount that, if the entity had not been exempt from tax, would not have been the entity’s assessable income; or the cost base to the entity of the interest or unit as at 30 June 1988 is reduced by so much of the amount as is not attributable to a deduction allowed under former Division 10C or 10D of the Income Tax Assessment Act 1936. (1) Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (2) and (3) of this section apply if an entity exercises rights or options as mentioned in that section to acquire: (b) the greater of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (b) the lesser of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (4) The payment referred to in subsection (2) or (3) can include giving property. To the extent that the payment does, use the market value of the property in working out the amount of the payment. (1) A notice given under subsection 82AAT(1A) or (1CB) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑170 of the Income Tax Assessment Act 1997. (2) A notice given under subsection 82AAT(1C) or (1CD) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑180 of the Income Tax Assessment Act 1997. (1) A proportion of the ordinary income and statutory income of a continuously complying fixed interest ADF of an income year that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).  > Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the income year. > Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the income year. (4) A choice for the purposes of the definition of reckoning time in subsection (5) must be made on or before the date of lodgment of the income tax return of the ADF for the income year to which the choice relates, or before a later day allowed by the Commissioner. > continuously complying fixed interest ADF, in relation to an income year (the current year), means a fund that is a fixed interest complying ADF in relation to each of the following years: > current 25 May balance, in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time: (b) subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 September 1989 is to be added to the balance; (b) a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that day, made a deposit with the ADF that consisted wholly or partly of the roll‑over (as defined in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 as in force on that day) of an eligible termination payment as so defined, being an eligible termination payment that included a concessional component (as so defined). > fixed interest complying ADF, in relation to a year of income, means a complying ADF where both of the following conditions are satisfied: (a) not less than 90% of the amount that, apart from this section, would be the assessable income of the ADF of the income year (other than non‑arm’s length income or amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997) consists of any one or more of the following: (ii) any profit arising on the disposal, redemption, cancellation or maturity of a CGT asset referred to in paragraph 295‑85(3)(b) of the Income Tax Assessment Act 1997; (iii) an amount included in assessable income under Division 16E of Part III of the Income Tax Assessment Act 1936 (or would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply); (ii) virtual PST life insurance policies (as defined in the Income Tax Assessment Act 1997) issued by a life insurance company. > original 25 May balance, in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988. > reckoning time, in relation to an ADF in relation to an income year, means the beginning of the income year, or such other time during the income year as the ADF chooses in accordance with subsection (4). (6) This section does not apply to an ADF in relation to an income year unless the whole of the benefit that would accrue to the ADF from the application of this section in relation to the income year has been, or can reasonably expected to be, passed on to eligible depositors. An election made by the trustee of a complying superannuation fund under subsection 279(4) of the Income Tax Assessment Act 1936 that had effect for the income year of the fund in which 30 June 2007 occurs continues to have effect as if it had been made under section 295‑465 of the Income Tax Assessment Act 1997. Subdivisions 295‑I (no‑TFN contributions) and 295‑J (Tax offset for no‑TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006‑2007 income year ends on a day (the end day) after 1 July 2007 as if: (b) the entity’s no‑TFN contributions income for the entity’s 2007‑2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007‑2008 income year if the contributions concerned had been made in the entity’s 2007‑2008 income year. (2) Division 301 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section because you are a member of the fund in the same way as it would apply if the payments were superannuation member benefits paid to you from a complying superannuation fund. For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. Subdivision 301‑F of the Income Tax Assessment Act 1997 applies in relation to income years starting on or after 1 July 2007. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to the following in respect of an income year that starts on or before 1 July 2021: (b) the amendments of the Income Tax Assessment (1997 Act) Regulations 2021 made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023. (a) a superannuation benefit (the trigger benefit) was paid to a person in the 2020‑21 income year or an earlier income year; and (c) the trigger benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; and (2) The Commissioner cannot amend an assessment on the basis that a superannuation benefit paid to the person is a superannuation income stream benefit because of the amendments made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 if: (iii) the superannuation benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (a) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (b) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. (1) The Minister may, by legislative instrument, make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions) that: (a) relate to the amendments or repeals made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023; and (2) Without limiting subsection (1), rules made under this section before the end of the period of 12 months starting on the day that Schedule commences may provide that provisions of that Schedule, or any other Act or instrument, have effect with any modifications prescribed by the rules. Those provisions then have effect as if they were so modified. (2) Division 302 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section after another person’s death, because the other person was a member of that fund, in the same way as it would apply if the payments were superannuation death benefits paid to you from a complying superannuation fund. For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if: (b) just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. (2) For the purposes of Subdivision 82‑B of Division 82, Division 302 and section 303‑5 of the Income Tax Assessment Act 1997, the definition of death benefits dependant in section 302‑195 of that Act applies as if paragraphs (a) and (b) of the definition were replaced with the following paragraphs: (a) a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008 or a person who was formerly such a spouse; or (b) a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008, who is aged less than 18. (ii) a superannuation guarantee payment, a small superannuation account payment, an unclaimed money payment, a superannuation co‑contribution benefit payment or a superannuation annuity payment. (2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you at a time in the period: (i) a condition of release specified in item 107A or 207AA of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; or (ii) a condition of release specified in item 109AA of the table in Schedule 2 to the Retirement Savings Accounts Regulations 1997. (1) This section applies to a superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with section 292‑80B. (2) The superannuation benefit is not assessable income and is not exempt income to the extent that it does not exceed the amount mentioned in subsection (3). (3) The amount is the amount of excess non‑concessional contributions stated in the release authority in accordance with paragraph 292‑80A(3)(a), reduced (but not below zero) by the amount of any superannuation benefit that was not assessable income and not exempt income under a previous operation of subsection (2) in relation to the release authority. (4) The superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3). (a) you have an interest in a FIF (within the meaning of Part XI of the Income Tax Assessment Act 1936, as in force just before the commencement of item 37 of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010) (the paying fund); and (b) Subdivision 305‑B of the Income Tax Assessment Act 1997 applies in relation to the paying fund (see section 305‑55 of that Act); and (c) the paying fund transfers an amount to a complying superannuation fund in respect of you during the deduction year; and (d) you choose under section 305‑80 of the Income Tax Assessment Act 1997 that the amount, or part of the amount, is to be treated as assessable income of the complying superannuation fund; and (e) immediately before the transfer happens, there is a post‑FIF abolition surplus (within the meaning of the Income Tax Assessment Act 1936) for the paying fund in relation to you; and For the purposes of the definition of specified roll‑over amount in the Income Tax Assessment Act 1997, treat the taxable component of a directed termination payment (within the meaning of section 82‑10F) as the element untaxed in the fund of a superannuation benefit that is a roll‑over superannuation benefit. (1) This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007. > Note: This section also applies to an income stream replacing an earlier one because of an involuntary roll‑over (see section 307‑127). (2) Despite subsection 307‑125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows: (a) first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007); (b) next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits. The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit. (3) Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened: (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day; (ba) the holder of the superannuation interest is aged 60 or above on 1 July 2007, if none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day. (a) treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and (b) work out the tax free component of the superannuation interest for the purposes of section 307‑125 of the Income Tax Assessment Act 1997 under subsections (6) and (6A). (i) an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and (ii) the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time; (b) next, work out the unused undeducted purchase price (within the meaning of paragraph (a) of the definition of that term in subsection 27A(1) of the Income Tax Assessment Act 1936 just before the commencement of this section, and disregarding paragraphs (b) and (c) of that definition) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007; (c) next, work out the pre‑July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this section) of the eligible termination payment. (a) at least one superannuation income stream benefit was paid from the superannuation income stream before 1 July 1994; or (b) section 27AAAA of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007) applied to the superannuation income stream just before 1 July 2007; (7) For the purposes of paragraph (6)(c), disregard the value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment. (8) If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as: (b) if 1 or more other events mentioned in subsection (3) happened before the commutation—the time just before the earliest of those events happens. (a) references in that section to the later income stream (in relation to a time, or event happening, before the payment of that involuntary roll‑over superannuation benefit) include references to the earlier income stream; and (b) references in that section to the superannuation interest supporting the later income stream (in relation to a time, or event happening, before the payment of that benefit) include references to the earlier interest. (1) This section applies for the purposes of working out the amount of your total superannuation balance just before 1 July 2017. (2) The transfer balance mentioned in paragraph 307‑230(1)(b) of the Income Tax Assessment Act 1997 just before 1 July 2017 is taken to be equal to: (a) the sum of the transfer balance credits (if any) in your transfer balance account just after the start of 1 July 2017; less (b) the sum of the transfer balance debits (if any) arising in your transfer balance account on 1 July 2017 under item 4 of the table in subsection 294‑80(1) of that Act (about payment splits). (1) Section 307‑231 of the Income Tax Assessment Act 1997 applies in relation to borrowings that arise under contracts entered into on or after 1 July 2018. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2018 is treated as if it arose under a contract entered into before 1 July 2018 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) treat a deduction made under former section 279 of the Income Tax Assessment Act 1936 as having been made under section 295‑465 of the Income Tax Assessment Act 1997 instead; and (b) treat a deduction made under former section 279B of the Income Tax Assessment Act 1936 as having been made under section 295‑470 of the Income Tax Assessment Act 1997 instead. If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007‑2008 income year is, despite subsection 307‑345(1), the total of: (b) the amount by which $140,000 exceeds the upper limit for the 2006‑2007 income year (worked out under section 159SG of that Act). Division 316 of the Income Tax Assessment Act 1997 applies in relation to demutualisations occurring on or after 1 July 2008. If: (a) any assets held by the benefit funds of a life insurance company that is a friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a complying superannuation fund; and (b) the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer; the transfer is disregarded for any purposes of the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936. (1) In working out the amount that a life insurance company can deduct, in respect of life insurance policies that are disability policies (other than continuous disability policies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income. (2) In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection (1) applies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company’s liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320‑85(4) of that Act. If: (2) If the life insurance company wishes to include a part of an approved asset in its virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑87(2) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society establishes a virtual PST in the 2000‑01 income year, the calculation of the transfer values of the company’s virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year. (1) Subsection (3) applies for the purposes of subparagraph (b)(i) of the definition of virtual PST life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 259 of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007. (2) Subsection (3) also applies for the purposes of subparagraph (b)(i) of the definition of complying superannuation/FHSA life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 47 of Schedule 7 to the First Home Saver Accounts (Consequential Amendments) Act 2008. (3) Treat an annuity as having been purchased out of a superannuation lump sum or an employment termination payment, if the annuity was purchased: (b) out of an eligible termination payment (within the meaning of the Income Tax Assessment Act 1997, as in force just before the commencement mentioned in subsection (1) of this section). (2) If the life insurance company wishes to include a part of an approved asset in its segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (a) a life insurance company had a liability before 1 July 2000 under a life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and (c) there is a transfer of the company’s assets to the segregated exempt assets to meet that liability or that part of the liability; (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑105(1) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320‑225 of the Income Tax Assessment Act 1997 in the 2000‑01 income year, the calculation of the transfer values of the company’s segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year. Section 322‑25 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Part VC of the Insurance Act 1973 after 17 October 2008. 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you > new Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force after the commencement of this section. > old Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. > STS taxpayer means an STS taxpayer within the meaning of Division 328 of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. #### 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years (1) This section applies for the purpose of working out whether you are a small business entity (other than because of subsection 328‑110(4) of the Income Tax Assessment Act 1997) for the 2007‑08 or 2008‑09 income year. (2) You work out your aggregated turnover for the 2005‑06 or 2006‑07 income year as if the amendments made by Schedule 1 to the Tax Laws Amendment (Small Business) Act 2007 had been in force in relation to that year. (a) your aggregated turnover for the 2005‑06 income year (worked out in accordance with subsection (2)) is $2 million or more; but (b) your STS group turnover for that year (worked out under Subdivision 328‑F of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section) is less than $2 million. (2) The following provisions apply as if you are a small business entity for the income year in which you are winding up the business: #### 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you (1) For the purpose of working out whether you are a small business entity for the 2007‑08, 2008‑09, 2009‑10 or 2010‑11 income year (each a relevant income year) for the purposes of a provision to which subsection (3) applies: (2) An entity (the first entity) controls a discretionary trust for a relevant income year if, for any of the 4 income years (a previous income year) before that year: (a) if the previous income year is before the 2007‑08 income year—the trustee of the trust made a distribution of $100,000 or more to the first entity, any of its affiliates, or the first entity and any of its affiliates; or (i) the trustee of the trust paid to, or applied for the benefit of, the first entity, any of the first entity’s affiliates, or the first entity and any of its affiliates, any of the income or capital of the trust; and (ii) the percentage (the control percentage) of the income or capital paid or applied is at least 40% of the total amount of income or capital paid or applied by the trustee for that year. (1) This section sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (2) This section also sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (3) Any ordinary income that, apart from paragraph 328‑105(1)(a) of the Income Tax Assessment Act 1997 (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have derived before the changeover year (while you were using the STS accounting method) and you have not included in your assessable income because you have not received it is included in your assessable income for the changeover year. (4) Any general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, that, apart from paragraph 328‑105(1)(b) of that Act (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have incurred before the changeover year (while you were using the STS accounting method) and that you have not deducted because you have not paid them can be deducted for the changeover year. (b) for any later income year for which you are a small business entity but only if you used the STS accounting method for the income year before that later year. > Note: Example: You are a small business entity for the 2007‑08 and 2008‑09 income years and you continue to use the STS accounting method for those years. You are not a small business entity for the 2009‑10 income year so you cannot continue to use the STS accounting method for that year. Because you cannot use the STS accounting method for the 2009‑10 income year, you will not be able to use it again for a later income year even if you are a small business entity for that later year. In sections 328‑115 and 328‑120, STS accounting method means the accounting method that was required by the Income Tax Assessment Act 1997 to be used by STS taxpayers for the 2004‑05 income year. (b) you made a choice under subsection 328‑175(3) of old Subdivision 328‑D in relation to a depreciating asset you use to carry on a primary production business and for which you could deduct amounts under Subdivision 40‑F or 40‑G of the Income Tax Assessment Act 1997. (2) In determining whether you can choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997 in an increased access year, disregard subsection 328‑175(10) of that Act. (3) In applying paragraph 328‑175(10)(b) of that Act for the purpose of determining whether you can choose to use that Subdivision in any income year after the increased access years, disregard: (4) Paragraph 328‑180(1)(b) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that paragraph to $1,000: (i) first used the asset, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (i) first used the asset, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (i) first used the asset, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, on or after 1 July 2023 and on or before 30 June 2026. (a) a reference in that paragraph to the end of the income year in which you start to use the asset, or have it installed ready for use, for a taxable purpose were a reference to the earlier of: if: (i) first used the asset, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021. (5) Paragraph 328‑180(2)(a) or (3)(a) of the Income Tax Assessment Act 1997 applies to an amount included in the second element of the cost of an asset as if a reference in that paragraph to $1,000: (5A) For the purposes of determining whether, under subsection 328‑180(2) of the Income Tax Assessment Act 1997, you can deduct, for an income year (the current year), the taxable purpose proportion of an amount included in the second element of the cost of an asset, disregard paragraph (b) of that subsection if: (2) For the purposes of determining whether subsection 328‑180(1) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (b) of that subsection (which sets a limit of $1,000 on the cost of the asset) if, in the period beginning at the 2020 budget time and ending on 30 June 2023, you: (3) For the purposes of determining whether subsection 328‑180(2) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (a) of that subsection (which sets a limit of $1,000 on the amount) if the amount is included in the second element of the cost of the asset at any time in the period beginning at the 2020 budget time and ending on 30 June 2023. (4) In applying paragraph 328‑180(3)(a) of the Income Tax Assessment Act 1997 to an asset, disregard an amount included in the second element of the cost of the asset if the amount is deducted under subsection 328‑180(2) of that Act, as modified by subsection (3) of this section. (5) Section 328‑210 of the Income Tax Assessment Act 1997 applies as if the words “less than $1,000 but” in subsection (1) were disregarded, in relation to a deduction for an income year that ends: Subsection 328‑190(2) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that subsection to 15% were a reference to 57.5% if you are covered by section 40‑125 for the asset (which is about backing business investment). (1) A depreciating asset of yours that had been allocated to your general STS pool is treated as being allocated to your general small business pool. (2) A depreciating asset of yours that had been allocated to your long life STS pool is treated as being allocated to your long life small business pool. (3) If you made a choice, under subsection 328‑185(5) of old Subdivision 328‑D, not to have a depreciating asset allocated to your long life STS pool, the choice has effect for the purposes of subsection 328‑185(5) of new Subdivision 328‑D. (1) This section applies if a depreciating asset of yours is treated as being allocated to your general small business pool or long life small business pool under section 328‑185. (2) The opening pool balance of your general small business pool or long life small business pool for the 2007‑08 income year is taken to be the closing pool balance of your general STS pool or long life STS pool, as the case requires, for the 2006‑07 income year, reduced or increased by any adjustment required under section 328‑225 of new Subdivision 328‑D (about change in the business use of an asset). (a) you were not an STS taxpayer for the 2006‑07 income year (because you stopped being an STS taxpayer before that time); but (b) you are a small business entity for the 2007‑08 income year or a later income year and you choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets for that income year; the opening pool balance of your general small business pool or long life small business pool includes the sum of the taxable purpose proportions of the adjustable values of depreciating assets allocated to the pool under subsection 328‑185(3) of new Subdivision 328‑D for that year. (1) This section applies for the purposes of applying Subdivision 328‑D of the Income Tax Assessment Act 1997 for the 2012‑13 income year and later income years. (2) A depreciating asset that had been allocated to your long life small business pool is treated as being allocated to your general small business pool. (a) the closing pool balance of your general small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under section 328‑225 of that Act; and (b) the closing pool balance of your long life small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under that section. (1) This section applies if you chose to stop being an STS taxpayer for the 2005‑06 income year or the 2006‑07 income year. (2) You cannot choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets until at least 5 years after the income year for which you chose to stop being an STS taxpayer. > Note: Subdivision 328‑D of the Income Tax Assessment Act 1997 continues to apply to depreciating assets that have been allocated to your small business pools even if you are not a small business entity, or do not choose to use that Subdivision, for an income year: see section 328‑220 of that Subdivision. (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct 20% of particular expenditure for your 2023‑24 income year if: (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (d) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑450 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (6) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (ii) if the provider is a registered body of a kind listed in paragraph (2)(b), (c) or (d)—the training is within the provider’s scope of registration for that kind of registered body; and (d) each enrolment, or arrangement, for the provision of the training is made or entered into at or after 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022; and > Note: Paragraphs (b) and (c) mean this section will not apply to expenditure for on‑the‑job training or training provided by you in house. (a) a registered higher education provider (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); (b) a NVR registered training organisation (within the meaning of the National Vocational Education and Training Regulator Act 2011); (c) a registered education and training organisation (within the meaning of the Education and Training Reform Act 2006 (Vic.)); (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct for your 2023‑24 income year an amount that is equal to the sum of: (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (3) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑460 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (4) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (b) you incur the expenditure in the period starting at 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022 and ending at the end of: (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (4) For the purposes of paragraphs (1)(c) and (2)(c), in working out whether you can deduct an amount of expenditure on a depreciating asset, assume that: (b) throughout that effective life, you will use the asset for a taxable purpose to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose. (a) 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑470(1) or (3) applies in relation to the income year; and > Note: The deduction relates to the period of 1 July 2023 to 30 June 2024. An entity may have deducted an amount under paragraph (a) for a previous income year if the entity has a substituted accounting period. (2) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑470 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (3) Sections 8‑10, 40‑215 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (c) you start to use the asset, or have it installed ready for use, for any purpose after 30 June 2023 but before 1 July 2024; and (d) you start to use the asset, or have it installed ready for use, for a taxable purpose at a time (the start time) that is: (e) you are a small business entity, or an entity covered by subsection (4), for the income year that includes the start time; and (h) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) a new reasonably comparable depreciating asset that uses a fossil fuel (other than a use of which that is merely incidental) is available in the market at the start time; (ii) if the asset is being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than the other asset; (iii) if the asset is not being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than a new reasonably comparable depreciating asset that is available in the market at the start time; or (i) a depreciating asset (other than an asset excluded under subsection (6)) that uses electricity, or energy that is generated from a renewable source, to be more energy efficient; (iv) the use of electricity, or energy that is generated from a renewable source, by another depreciating asset to be monitored. (a) the amount is included in the second element of a depreciating asset’s cost under paragraph 40‑190(2)(a) of the Income Tax Assessment Act 1997; and (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (d) you are a small business entity, or an entity covered by subsection (4), for the income year in which the expenditure is incurred; and (i) if the asset could use a fossil fuel (other than a use of which that is merely incidental)—the asset to only use electricity, or energy that is generated from a renewable source; (ii) if the asset uses electricity, or energy that is generated from a renewable source—the asset to be more energy efficient; (g) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) For the purposes of paragraph (1)(b) or (3)(b), in working out whether you can deduct an amount of expenditure assume that: (i) for the purposes of paragraph (1)(b)—to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose; or (ii) for the purposes of paragraph (3)(b)—to the same extent as you use it for a taxable purpose in the income year in which the expenditure is incurred. (b) expenditure (other than expenditure referred to in subparagraph (3)(e)(i)) on an asset that can use a fossil fuel (other than a use of which that is merely incidental); (c) an asset that solely or predominantly generates electricity from a renewable source (for example, photovoltaic cells) or expenditure on such an asset; (d) an asset, or expenditure, being capital works for which you can deduct an amount under Division 43 of the Income Tax Assessment Act 1997; > Note: Subsections (1) and (3) also do not apply to an item of trading stock because such an asset is not a depreciating asset: see section 40‑30 of the Income Tax Assessment Act 1997. A reference in each of the following provisions of the Income Tax Assessment Act 1997 to a registration under section 27A of the Industry Research and Development Act 1986 includes a reference to a registration under former section 39J of that Act: (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) the R&D entity cannot deduct an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from: (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D entity could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:22pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the R&D entity is taken to be able to deduct under subsection 355‑315(2) of the new Act that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the R&D entity’s assessable income for the event year under subsection 355‑315(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 for the asset, the R&D entity is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑446 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the R&D entity is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑465 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: Section 355‑315 of the new Act would otherwise apply for the event in a case where the R&D entity had new law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by an R&D partnership; and (i) the partner can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the partner chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D partnership could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the partner is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:21.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D entity</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D partnership</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the partner is taken to be able to deduct under subsection 355‑525(2) of the new Act the partner’s proportion of that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the partner’s assessable income for the event year under subsection 355‑525(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partner’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if one or more partners (including the partner) in the R&D partnership is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset, the partner is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑448 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the partner is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑467 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s deductions under section 355‑520 of the new Act mentioned in subsection (4A) of this section. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the partner for the event, do so apply to the partner for the event. > Note 1: Section 355‑525 of the new Act would otherwise apply for the event in a case where the partner had new law deductions. Item 7 of the table in subsection 57‑110(2) in Schedule 2D to the Income Tax Assessment Act 1936 applies as if the deduction rules set out in the final column of that item also included former sections 73BA and 73BH of the Income Tax Assessment Act 1936. For the purposes of step 1 of the method statement in subsection 355‑415(2) of the Income Tax Assessment Act 1997, also disregard amounts that have already been taken into account under former subsection 73B(14AA) of the Income Tax Assessment Act 1936 for the R&D entity, the grouped entity and the R&D activities for an earlier income year. (1) This section applies if, apart from former paragraph 73B(10)(a) of the Income Tax Assessment Act 1936, an eligible company could deduct advance R and D expenditure in one or more income years commencing on or after 1 July 2011. > Note: That deduction would be under former section 73B of that Act as that former section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (a) apart from Subdivision H (prepaid expenditure) of Division 3 of Part III of the Income Tax Assessment Act 1936, an eligible company can deduct an amount under former section 73B, 73BA, 73BH, 73QA, 73QB or 73Y of that Act for an income year commencing before 1 July 2011; and (c) apart from former paragraph 73B(10)(a) of that Act, the eligible company could deduct an amount, as a result of that application of that Subdivision, for an income year commencing on or after 1 July 2011. > Note: That deduction would be under that Act as it applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (3) Former paragraph 73B(10)(a) of that Act is taken to apply to those income years commencing on or after 1 July 2011 as if the reference in that former paragraph to section 39J of the Industry Research and Development Act 1986 were a reference to section 27A of that Act. (4) An expression used in this section that is also used in former section 73B of the Income Tax Assessment Act 1936 has the same meaning in this section as it has in that former section. This Subdivision applies to core technology (within the meaning of former section 73B of the Income Tax Assessment Act 1936) if: (a) you incurred core technology expenditure (within the meaning of that former section) in an income year commencing before 1 July 2011 in relation to the core technology under one or more contracts entered into at or after the time referred to in former subsection 73B(12) of that Act; and (b) that expenditure (the undeducted expenditure) cannot be deducted for the last income year commencing before 1 July 2011. (1) This section applies for the purposes of Division 40 of the Income Tax Assessment Act 1997, other than sections 40‑292 and 40‑293 of that Act, if the core technology (the asset) is a depreciating asset. (2) Disregard this section, including its effect on the amount you can deduct under section 40‑25 of that Act for the asset, for the purposes of working out: (3) The asset’s opening adjustable value for the first income year that commences on or after 1 July 2011 (the first new income year) is equal to the amount of the undeducted expenditure. (4) Subsection 40‑75(2) of the Income Tax Assessment Act 1997 applies to the asset as if the first new income year were a change year (within the meaning of that subsection). If the core technology is not a depreciating asset, you can deduct the undeducted expenditure in equal proportions over a period of 5 income years starting in the first income year commencing on or after 1 July 2011. To work out the film component (if any) of your tax loss for the 1997‑98 income year or a later income year, apply former section 375‑805 of the Income Tax Assessment Act 1997. If you incurred a film loss for the purposes of former section 79F (Film losses of 1989‑90 to 1996‑97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989‑90 to 1996‑97 income years, that film loss is the film component of your tax loss for that income year. (1) To work out your film loss (if any) for the purposes of the Income Tax Assessment Act 1997 for the 1989‑90 or a later income year, apply former section 375‑810 of that Act. (2) You can deduct in the 1997‑98 or a later income year your film loss for any of the 1989‑90 to 1996‑97 income years only to the extent that it has not already been deducted. (1) Division 392 of the Income Tax Assessment Act 1997 applies to assessments for the 1998‑99 income year and later income years. (a) it had applied to your assessment for each income year before the 1998‑99 income year for which Division 16 of Part III of the Income Tax Assessment Act 1936 applied in relation to your income; and (b) you had carried on a primary production business during each income year before the 1998‑99 income year when you carried on a business of primary production; and (c) for each income year before the 1998‑99 income year you had a basic taxable income equal to your taxable income for the income year for the purposes of Division 16 of Part III of the Income Tax Assessment Act 1936. > Note: Section 149A of the Income Tax Assessment Act 1936 identifies what your taxable income for an income year is for the purposes of Division 16 of Part III of that Act. Division 392 of the Income Tax Assessment Act 1997 does not apply to your assessment for the 1998‑99 income year or a later income year if you made an election under section 158A (Election that Division not apply) of the Income Tax Assessment Act 1936 relating to an income year before the 1998‑99 income year. 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 A reference in Division 393 of the Income Tax Assessment Act 1997 to a deduction under section 393‑5 of that Act for making a farm management deposit is taken to include a reference to a deduction under section 393‑10 in Schedule 2G to the Income Tax Assessment Act 1936, as in force just before the commencement of this section, if the deposit was made before the 2010‑11 income year. #### 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 (b) the deposit was made with an FMD provider as a result of a request to which section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, applied; the unrecouped FMD deduction in respect of the deposit at that time is equal to the amount of the unrecouped deduction (within the meaning of the former subsection 159GA(3) of the Income Tax Assessment Act 1936) in respect of the deposit immediately before it ceased to be a deposit under the Loan (Income Equalization Deposits) Act 1976. > Note: This means that the unrecouped deduction relating to the deposit under the Loan (Income Equalization Deposits) Act 1976 continues to apply (by becoming an unrecouped FMD deduction) when the deposit is transferred to an FMD provider as a farm management deposit. The Loan (Income Equalization Deposits) Act 1976 was repealed on 22 February 2005. If a beneficiary of a trust was covered by paragraph (c) of the definition of primary producer in section 393‑25 in Schedule 2G to the Income Tax Assessment Act 1936 in the 2009‑10 income year, treat subsection 393‑25(3) of the Income Tax Assessment Act 1997 as having applied to the beneficiary for the purpose of determining the maximum number of choices that the trustee may make under subsection 393‑27(2) of that Act for the 2010‑11 income year. (a) a farm management deposit of an owner was unclaimed moneys for the purposes of section 69 of the Banking Act 1959; and (2) For the purpose of subsection 393‑10(1) of the Income Tax Assessment Act, treat the repaid unclaimed moneys as a repayment of the deposit of the owner. (3) To avoid doubt, the payment of unclaimed moneys to the Commonwealth under section 69 of the Banking Act 1959 is not a repayment of the deposit of the owner for the purposes of Division 393 of the Income Tax Assessment Act 1997. 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 #### 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 If a farm management deposit was made with an FMD provider as a result of a request under section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, then: (a) subsections 393‑40(1) to (4) of the Income Tax Assessment Act 1997 apply as if the day the deposit was made was the day on which the deposit was originally made under the Loan (Income Equalization Deposits) Act 1976; and (1) A copyright collecting society to which section 51‑43 of the Income Tax Assessment Act 1997 applies, may elect that, from 1 July 2004, the section apply to all ordinary income, and statutory income, collected or derived by the society on or after 1 July 2004. Division 420 of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division. Subdivision 615‑C of the Income Tax Assessment Act 1997 applies to you with the modifications set out in this Subdivision if you chose to obtain a roll‑over involving \*shares or units that: (b) were your trading stock, or revenue assets, at the time immediately before that disposal, redemption or cancellation. (1) Disregard subparagraph 615‑45(a)(ii), and paragraph 615‑45(b), of the Income Tax Assessment Act 1997 if the roll‑over relates to \*shares that were disposed of, redeemed or cancelled. (2) For each of the \*shares in the interposed company that you acquired in return for those of your shares or units in the original entity that were your \*trading stock at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  (2) For the purpose of calculating any profit or loss on a future disposal, cessation of ownership, or other realisation of a \*share in the interposed company that you acquired in return for those of your shares or units in the original entity that were \*revenue assets at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  Subdivision 620‑A of the Income Tax Assessment Act 1997 applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. (1) Part 3‑90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Act (No. 1) 2002 and amended by: (2) Section 713‑50 of the Income Tax Assessment Act 1997 (about factors to consider in determining destination of distribution by non‑fixed trust) applies for the purposes of this Part in the same way as it applies for the purposes of Part 3‑90 of that Act. ### Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly‑owned subsidiary of the entity (the future head company) that became the head company of the group; or (ii) at some time during that period, the entity was a wholly‑owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (ii) it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (1) If a group is a transitional group, its head company may, subject to subsection (3), choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (3) If the choice is to be made after the end of the period mentioned in paragraph (2)(a) and before the end of the day mentioned in paragraph (2)(b), it cannot be made unless each entity in relation to which the conditions in subsection (5) are satisfied has agreed to it being made. (a) the entity (the leaving entity) ceased to be a subsidiary member of the group before the choice was made (in a subsection (3) case) or before the revocation took place (in a subsection (4) case); and (b) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; and (c) the asset had become that of the head company because that section applied when a chosen transitional entity (whether or not the same entity as the leaving entity) became a subsidiary member. Section 716‑855 applies for the purposes of this Division in the same way as that section applies for the purposes of Part 3‑90 of the Income Tax Assessment Act 1997. is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705‑B of that Act and with this Division. 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity Section 701‑10 (cost to head company of assets of joining entity) and subsection 701‑35(4) (setting value of trading stock at tax‑neutral amount) of the Income Tax Assessment Act 1997 do not apply to the assets of a chosen transitional entity. > Note: The fact that the head company inherits the entity’s history under section 701‑5 of that Act when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time. #### 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities (2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non‑chosen subsidiary) is worked out in a special way. (b) for each sub‑group (see subsection (6)) that exists in relation to the non‑chosen subsidiary—the sub‑group’s notional allocable cost amount (see subsection(5)) for the non‑chosen subsidiary. (4) The head company adjusted allocable amount for the non‑chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if; (b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of head company’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub‑group in relation to the non‑chosen subsidiary. (5) For each sub‑group that exists in relation to the non‑chosen subsidiary, there is a sub‑group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non‑chosen subsidiary if: (a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non‑chosen subsidiary and the entities comprising the sub‑group; and (c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub‑group membership interests (see subsection (6)) in relation to the sub‑group, and any such entity held those membership interests during the period when it actually held them; and (d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of chosen transitional entity’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub‑group. (6) If a chosen transitional entity holds membership interests in a non‑chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non‑chosen subsidiary: (a) the chosen transitional entity and each interposed non‑chosen subsidiary comprise a sub‑group in relation to the non‑chosen subsidiary (unless the non‑chosen subsidiary is included in a sub‑group in relation to another non‑chosen subsidiary); and (i) the membership interests that the chosen transitional entity holds directly in the non‑chosen subsidiary or in any of the interposed non‑chosen subsidiaries; (ii) the membership interests that each interposed non‑chosen subsidiary holds directly in the non‑chosen subsidiary or in any of the other interposed non‑chosen subsidiaries. #### 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities If any provision of the Income Tax Assessment Act 1997 would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply. > Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred. (1) This section has effect for the purposes of applying section 705‑70 (step 2 of allocable cost amount) of the Income Tax Assessment Act 1997 in relation to a transitional entity. (2) In spite of subsection 705‑70(1A) of that Act, if the amount of an accounting liability of the transitional entity would be different when it becomes an accounting liability of the transitional group, that difference is not taken into account in working out the amount of the liability. #### 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different (a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset (the roll‑over asset) for which there was: (ii) roll‑over relief under section 40‑340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and (i) became an asset of the head company when the transitional group came into existence because subsection 701‑1(1) (the single entity rule) of that Act applies; or differs at that time from what it would have been if the act, transaction or event that gave rise to the CGT event had not occurred in relation to the roll‑over asset; then the provisions mentioned in subsection (2) apply as if the act, transaction or event had not occurred in relation to the roll‑over asset. (a) the act, transaction or event mentioned in subsection (1) happened before a demerger and in connection with the demerger; and (b) before the transitional group came into existence, at least one of the following entities ceased to be a member of the demerger group because of the demerger: (i) the originating company in relation to the roll‑over, or the transferor in relation to the roll‑over relief, was a foreign resident; and (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as a transitional foreign‑held subsidiary of the group. #### 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets (1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied. (2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset. (a) the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and (b) former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset. (4) The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group. (6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses. #### 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets (b) just before the transitional group came into existence, the entity that became the head company held a pre‑CGT asset; and (d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre‑CGT asset and is held by the head company only because the entity is taken by subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company. (2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence. #### 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity (1) This section provides for an addition to the step 1 amount for working out under section 711‑20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity) that ceases to be a subsidiary member of the transitional group at a time (the leaving time), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701‑1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount for paragraph</span><span> </span><span>(2)(c)</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">If, because of the circumstances described in paragraphs</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(a) and (b):</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">The amount is:</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:180.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following provisions applied to the entity:</span></p><p class="Tablea"><span>(a) former section</span><span> </span><span>61A of the </span><span style="font-style:italic">Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(b) former Subdivision</span><span> </span><span>57</span><span>‑</span><span>I in Schedule</span><span> </span><span>2D to the</span><span style="font-style:italic"> Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(c) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(4) of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td><td style="width:148.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the amount treated as being the cost of the asset under that provision; and</span></p><p class="Tablea"><span>(b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>2</span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following subsections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span><span> applied to the entity:</span></p><p class="Tablea"><span>(a) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(5);</span></p><p class="Tablea"><span>(b) 58</span><span>‑</span><span>70(3)</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The amount treated as being the cost, or the first element of the cost, of the asset under that subsection</span></p></td></tr></tbody></table> ``` (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997, as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="4" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amounts and provisions for different dates of acquisition</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Date of the acquisition</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Amount</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Provision of Division</span><span style="font-weight:bold"> </span><span style="font-weight:bold">58 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> applying to the acquisition and the working out of the amount</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:76.7pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>160</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>220</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>After 30</span><span> </span><span>June 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>First element of the cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subsection</span><span> </span><span>58</span><span>‑</span><span>70(5)</span></p></td></tr></tbody></table> ``` > Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. > Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and ### Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: #### 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70‑45 to 70‑70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420‑51 to 420‑58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (a) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority‑owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority‑owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority‑owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority‑owned entity became a subsidiary member of the group, there was roll‑over relief under section 40‑340 of the Income Tax Assessment Act 1997. (a) while the asset is, because subsection 701‑1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, its tax cost setting amount is taken to be equal to the continuing majority‑owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711‑30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997. (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset becomes that of an entity (a new asset holder) other than the head company because subsection 701‑1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder) acquiring some or all of the membership interests in the new asset holder; and (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset is acquired by another entity (a new asset holder) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll‑over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value asset just before the acquisition; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 #### 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 (b) members of the consolidated group or the MEC group mentioned in subsection 104‑500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701‑1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701‑1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (3) If this section applies, neither subsection 104‑500(4) nor subsection 104‑500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year. ### Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C‑B); and (b) modifies certain rules in Part 3‑90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C‑C). > Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719‑2 and 719‑10 of this Act). 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership #### 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(ii) of that Act (see subsection 719‑2(3) of this Act). (b) a trust (a non‑resident trust) that does not meet the requirements in any item of the table in section 703‑25 of the Income Tax Assessment Act 1997. (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non‑resident company or a non‑resident trust; or Test entity must be a subsidiary member on assumption that non‑resident companies and non‑resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non‑resident company or non‑resident trust were a subsidiary member of the group. (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv). #### 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(iii) of that Act (see subsection 719‑2(3) of this Act). (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C‑10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3). If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C‑10 are met; and (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (ii) an entity that is a transitional foreign‑held indirect subsidiary of the group because of another application of this paragraph; Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign‑held indirect subsidiary would need to have satisfied the set of requirements in either section 701C‑10 or 701C‑15 (1) This Subdivision applies if an entity (the transitional foreign‑held joining entity) that is a transitional foreign‑held subsidiary or a transitional foreign‑held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time) the group comes into existence. (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign‑held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign‑held indirect subsidiary that becomes a subsidiary member at that time takes account of this. (a) section 701‑10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); apply, for the purposes of setting the tax cost of an asset of the transitional foreign‑held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign‑held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. > Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign‑held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign‑held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign‑held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign‑held subsidiary and the other entity. > Note 2: If the transitional foreign‑held joining entity is a transitional foreign‑held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705‑A of the Income Tax Assessment Act 1997, in its application in accordance with Subdivision 705‑B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company. Subsection 701‑35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax‑neutral amount) does not apply to the assets of the transitional foreign‑held joining entity if it is a transitional foreign‑held subsidiary. Section 701‑15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: (a) this section applies to each membership interest in the transitional foreign‑held subsidiary that is held by an entity (an eligible non‑resident) of a kind mentioned in subparagraph 701C‑20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign‑held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701‑1(2) of the Income Tax Assessment Act 1997 applies to the eligible non‑resident in the same way as it applies to the head company. Section 711‑5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: > Note: If the leaving entity is a transitional foreign‑held subsidiary (within the meaning of section 701C‑20 of the Income Tax (Transitional Provisions) Act 1997), this Division will, in accordance with subsection 701‑15(4) of this Act (see section 701C‑40 of the first‑mentioned Act), apply to membership interests that an eligible non‑resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity. (1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707‑C of the Income Tax Assessment Act 1997. (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period. (1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if: (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (d) the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997. (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: (1) The head company of a consolidated group may make a choice in the approved form to apply section 701D‑10 to another entity. (2) However, the head company cannot make that choice if subsection 701D‑10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (a) an asset of the head company because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701‑55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40‑77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40‑77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40‑285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount. (b) after the asset became an asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). > Note: The final entity will be different from the head company if an entity (the leaving entity) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40‑285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. > Note: The final entity will be entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701‑5 (the entry history rule) of that Act and perhaps also section 701‑40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity) became a subsidiary member of the group; and It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). > Note: In some cases, section 705‑47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40‑285(3) of this Act. If: (b) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and subsection 40‑285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701‑10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997. > Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997. (1) For the purposes of Part 3‑90 of the Income Tax Assessment Act 1997, this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960‑G of that Act whether the interest or right is a membership interest of the entity in the other entity. > Note: Under Subdivision 960‑G of the Income Tax Assessment Act 1997, a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001) apply to transactions in relation to the interest or right at the relevant time. Despite the amendments of section 703‑35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) If an entity (the joining entity) to which section 40‑75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time), this Subdivision applies in relation to: (ii) became assets of the head company of the group at the joining time because of section 701‑1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure. (1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). (2) If the joining entity could not deduct an amount under Subdivision 40‑B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701‑55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40‑35, 40‑37, 40‑40 or 40‑43 treated the joining entity as holding a notional asset. > Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705‑30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. (a) deductions under former Subdivision 330‑A, 330‑C or 330‑H of the Income Tax Assessment Act 1997, or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated an entity as holding because of the expenditure. (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); > Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40‑75(4) of this Act, but may have been reset since under Subdivision 40‑B of the Income Tax Assessment Act 1997. > Note 2: The effective life of a notional asset is specified by whichever one of sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act is relevant to the notional asset. (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (9) Section 705‑55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705‑45 of that Act. > Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705‑40 of the Income Tax Assessment Act 1997. (a) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701‑5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. > Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705‑305(3). (ii) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707‑A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member. 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value #### 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707‑320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor) other than the real loss‑maker mentioned in subsection 707‑315(1) of that Act for the bundle; and (b) both the real loss‑maker and the value donor became members of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (ca) neither the real loss‑maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (ii) a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (ii) section 713‑540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (2) It must have been possible for the real loss‑maker to have transferred the loss to the value donor under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss‑maker at the initial transfer time the amount worked out using the formula:  > Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707‑327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss‑maker to the transferee. > total of real loss‑maker’s non‑foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss‑makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) included in a bundle of losses: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. #### 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value (1) This section affects the calculation of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707‑325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936, in the bundle). > Note: This section does not affect the calculation of the real loss‑maker’s modified market value for other purposes (such as the real loss‑maker being a value donor for the purposes of another application of section 707‑325 of this Act). (3) One condition is that the event was an injection of capital directly into the real loss‑maker by the value donor mentioned in section 707‑325 of this Act. (c) that would have caused subsection 707‑325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss‑maker’s modified market value (even if no other events described in subsection 707‑325(4) of that Act had occurred), apart from this section. (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss‑maker (whether or not the event also involved either the value donor or the real loss‑maker); or (1) This section has effect for the purposes of working out under Subdivision 707‑C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707‑325, as if there were added to the modified market value of the real loss‑maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (c) the loss is not a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707‑A of that Act at the initial transfer time had the company: > Note: This section has effect even if the amount added to the real loss‑maker’s modified market value under section 707‑325 is nil because the value donor’s modified market value is nil. (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707‑325, as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (4) If the transferee mentioned in subsection 707‑325(1) chooses, sections 707‑310, 707‑335 (except paragraph 707‑335(2)(a)) and 707‑340 of the Income Tax Assessment Act 1997 (and subsections 707‑315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: > Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707‑325(1)(d) and (e) and subsection 707‑325(2) in an application of section 707‑325 separate from the application of that section mentioned in paragraph (1)(a) of this section. > Note: This means that a loss that provided a basis for section 707‑325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. (b) in connection with the requirement that it must have been possible for a company (the notional transferor) to transfer to another company (the notional transferee) for an income year a loss under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997. (b) ends immediately after the initial transfer time mentioned in subsection 707‑320(1) of the Income Tax Assessment Act 1997. > Note: For the purposes of identifying the trial year using the definition in section 707‑120 of the Income Tax Assessment Act 1997, the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time. (1) Subsection (3) of this section affects the calculation, under section 707‑325 of the Income Tax Assessment Act 1997 and section 707‑325 of this Act, of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (the formation time) the group became a consolidated group; and (b) the provisions described in subsection 707‑327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707‑327(1)(b) and (c) of this Act as if the bundle included the loss; and (d) subsection 707‑325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707‑325(1) of this Act chooses that this section apply in relation to the real loss‑maker. (2) Section 707‑325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. (3) Disregard for the purposes of subsection 707‑325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707‑325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or > Note: Disregarding such an event could have a direct or indirect effect on the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss‑maker’s modified market value calculated under section 707‑325 of the Income Tax Assessment Act 1997, if the real loss‑maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707‑325 of this Act to add an amount to the real loss‑maker’s modified market value for those purposes. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) that: (b) was transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from an entity other than the real loss‑maker. (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997. Disregard an event that is described in subsection 707‑325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707‑325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004. (1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss‑maker) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time) the transferee became the head company of a consolidated group; and (ii) the conditions in one or more of paragraphs 165‑15(1)(a), (b) and (c) did not exist in relation to the real loss‑maker; and (da) the real loss‑maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non‑transferred losses) of the same sort that the transferee made without a transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non‑transferred losses). (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. <table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Limit on utilising the losses</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For this income year:</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the losses that the transferee may utilise cannot exceed:</span></p></td></tr></thead><tbody><tr><td style="width:20.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:120.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The first income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span style="font-size:8pt; vertical-align:2pt">1</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The second income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) </span><span style="font-size:8pt; vertical-align:2pt">2</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the amount of the losses utilised for the income year mentioned in item</span><span> </span><span>1</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The third income year ending after the initial transfer time, or a later income year</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time</span></p></td></tr></tbody></table> ``` (4) Subdivision 707‑C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707‑A of that Act. > Note: This has 2 effects. First, Subdivision 707‑C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707‑A of that Act). (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). (7) This section does not limit the transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company. In working out when a choice may be made under subsection 707‑325(5), 707‑327(5), 707‑328A(4) or 707‑350(5), ignore losses to which section 713‑535 of the Income Tax Assessment Act 1997 applies. > Note: That section deals with losses transferred under Subdivision 707‑A of that Act from certain wholly‑owned subsidiaries of life insurance companies that are members of a consolidated group. Section 707‑405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act. (1) This section reduces the adjustable value of a notional asset that section 40‑35, 40‑37, 40‑38, 40‑40 or 40‑43 treats the head company of a consolidated group as holding, if: (b) that section treats the leaving entity as holding a notional asset because of section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997. > Note: Section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time. The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences. (1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event) happening involving an entity (the originating entity) and another entity (the recipient entity) if: (a) the event occurs in connection with a life insurance company (the member life insurance company) becoming a member of a consolidated group; and (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest) in a company or in another trust. (a) a life insurance company transfers an asset (also the original asset) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320‑200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset) to its segregated exempt assets where, apart from this Subdivision, section 320‑255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event) is made in connection with the life insurance company (also the member life insurance company) becoming a member of a consolidated group. (1) This Subdivision applies only if the originating entity (for a section 713‑505 case) or the life insurance company (for a section 713‑510 case) chooses that it apply. (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713‑510 of the Income Tax Assessment Act 1997; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713‑510 of the Income Tax Assessment Act 1997; and (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs. This Act, and the Income Tax Assessment Act 1997, apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group. (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain) that the originating entity would have made as a result of the deferral event is disregarded; and (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount) under paragraph 320‑15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (1) This section operates if, after the deferral event happens, another event (the new event) happens where the new event is: (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (i) the original asset being transferred to or from the company’s virtual PST under section 320‑180, 320‑185 or 320‑195 of the Income Tax Assessment Act 1997; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320‑235, 320‑240 or 320‑250 of that Act; or (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. > Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713‑505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (1) For a section 713‑505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713‑535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: (a) an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group at a time (the leaving time); and (b) but for the cessation of membership and section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision. Sections 716‑340 and 716‑345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. <table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:345.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Extended operation of sections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 1</span><br><span style="font-weight:bold">Sections</span><span style="font-weight:bold"> </span><span style="font-weight:bold">716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">340 and 716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">345 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> operate in relation to:</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 2</span><br><span style="font-weight:bold">In the same way as they operate in relation to:</span></p></td></tr></thead><tbody><tr><td style="width:5.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:161.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>46</span><span>‑</span><span>90 of that Act</span></p></td><td style="width:156.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>40</span><span>‑</span><span>455 of that Act</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software pool created under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure allocated to a software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Software, expenditure on which was in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>In</span><span>‑</span><span>house software, expenditure on the development of which is allocated to a software development pool</span></p></td></tr></tbody></table> ``` (1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: Section 703‑30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004. (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time) a wholly‑owned subsidiary of the entity that became the head company of the group (the head entity), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier‑1 company of the group at the formation time. Despite the amendment of section 719‑30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) Section 719‑160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719‑160(3) of the Income Tax Assessment Act 1997. (3) However, that effect of section 719‑160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division. (2) Paragraphs 701‑1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier‑1 company at the time the MEC group came into existence. (a) the entity and one or more other entities were members of a potential MEC group as eligible tier‑1 companies, throughout the period: (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier‑1 company, at the time the transitional group came into existence. To avoid doubt, sections 707‑325 and 707‑327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719‑305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707‑A of that Act. Subsection 719‑325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006. (1) A reference in an agreement to item 25 of the table in subsection 721‑10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: (1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: Division 725 applies to a scheme entered into on or after 1 July 2002. It also applies to a scheme entered into on or after 27 June 2002, but only if: ### Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (1) Division 727, as inserted by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 and amended by the New Business Tax System (Consolidation and Other Measures) Act 2003, applies to a scheme entered into on or after 1 July 2002. (b) a presumed indirect value shift that happens under the scheme and affects a realisation event that happens on or after 1 July 2002. (a) the economic benefits taken into account in determining that the scheme has resulted in that indirect value shift or presumed indirect value shift include economic benefits provided by: > Note: In that case, the consequences of the trigger event are worked out under Division 138 or 139 of the Income Tax Assessment Act 1997: see items 13 and 14 of Schedule 15 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002. (1) An indirect value shift does not have consequences under Division 727 of the Income Tax Assessment Act 1997 if, to the extent of at least 95% of their total market value, the greater benefits consist entirely of: (a) a right to have services that are covered by section 727‑240 of that Act provided directly by the losing entity to the gaining entity; or (d) if the losing entity’s 2002‑2003 income year ends before 30 June 2003—the start of the losing entity’s 2004‑2005 income year. (2) For the purposes of section 727‑850 (about a presumed indirect value shift affecting a realisation event) of the Income Tax Assessment Act 1997, subsection (1) of this section applies to the presumed indirect value shift: #### 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (2) Paragraph 727‑470(2)(a) of the Income Tax Assessment Act 1997 (as in force immediately before the commencement of this section) continues to have effect in relation to the indirect value shift as if the repeals and amendments made by Schedule 1, Parts 1 and 2 of Schedule 3 and Schedule 8 to the Tax Laws Amendment (Small Business) Act 2007 had not been made. ## 701C‑35 Trading stock value not set for 701C‑35 Trading stock value not set for assets of transitional foreign‑held subsidiaries Subsection 701‑35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax‑neutral amount) does not apply to the assets of the transitional foreign‑held joining entity if it is a transitional foreign‑held subsidiary. ## 701C‑40 Cost setting rules for exit case 701C‑40 Cost setting rules for exit cases—modification of core rules Section 701‑15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: (a) this section applies to each membership interest in the transitional foreign‑held subsidiary that is held by an entity (an eligible non‑resident) of a kind mentioned in subparagraph 701C‑20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign‑held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701‑1(2) of the Income Tax Assessment Act 1997 applies to the eligible non‑resident in the same way as it applies to the head company. ## 701C‑50 Cost setting rules for exit case 701C‑50 Cost setting rules for exit cases—reference to modification of core rule Section 711‑5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: > Note: If the leaving entity is a transitional foreign‑held subsidiary (within the meaning of section 701C‑20 of the Income Tax (Transitional Provisions) Act 1997), this Division will, in accordance with subsection 701‑15(4) of this Act (see section 701C‑40 of the first‑mentioned Act), apply to membership interests that an eligible non‑resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity. ## Division 701D Transitional foreign loss makers ## Subdivision 701D ‑A—Object of this Division ## 701D‑1 Object of this Division 701D‑1 Object of this Division (1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707‑C of the Income Tax Assessment Act 1997. (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period. ## Subdivision 701D ‑B—Rules allowing transitional foreign loss makers to remain outside consolidated group ## 701D‑10 Transitional foreign loss maker 701D‑10 Transitional foreign loss maker not member of group if certain conditions satisfied (1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if: (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (d) the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997. (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: ## 701D‑15 Choice to apply transitional rul 701D‑15 Choice to apply transitional rules to entity (1) The head company of a consolidated group may make a choice in the approved form to apply section 701D‑10 to another entity. (2) However, the head company cannot make that choice if subsection 701D‑10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and ## Division 702 Modified application of this Act to assets that an entity brings into a consolidated group ## 702‑1 Modified application of section 40 702‑1 Modified application of section 40‑77 of this Act to assets that an entity brings into a consolidated group (a) an asset of the head company because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701‑55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40‑77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40‑77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40‑285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount. ## 702‑4 Extended operation of subsection 4 702‑4 Extended operation of subsection 40‑285(3) (b) after the asset became an asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). > Note: The final entity will be different from the head company if an entity (the leaving entity) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40‑285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. > Note: The final entity will be entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701‑5 (the entry history rule) of that Act and perhaps also section 701‑40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity) became a subsidiary member of the group; and It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). > Note: In some cases, section 705‑47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40‑285(3) of this Act. ## 702‑5 Modified application of subsection 702‑5 Modified application of subsection 40‑285(6) of this Act after entity brings assets into consolidated group If: (b) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and subsection 40‑285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701‑10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997. > Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997. ## Division 703 Consolidated groups and their members ## 703‑30 Debt interests that are not membe 703‑30 Debt interests that are not membership interests (1) For the purposes of Part 3‑90 of the Income Tax Assessment Act 1997, this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960‑G of that Act whether the interest or right is a membership interest of the entity in the other entity. > Note: Under Subdivision 960‑G of the Income Tax Assessment Act 1997, a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001) apply to transactions in relation to the interest or right at the relevant time. ## 703‑35 Employee share schemes 703‑35 Employee share schemes Despite the amendments of section 703‑35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. ## Division 705 Tax cost setting amount for assets where entities become members of consolidated groups ## Subdivision 705 ‑E—Expenditure relating to exploration, mining or quarrying ## 705‑300 Application and object of this S 705‑300 Application and object of this Subdivision (1) If an entity (the joining entity) to which section 40‑75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time), this Subdivision applies in relation to: (ii) became assets of the head company of the group at the joining time because of section 701‑1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure. ## 705‑305 Rules affecting depreciating ass 705‑305 Rules affecting depreciating assets (1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). (2) If the joining entity could not deduct an amount under Subdivision 40‑B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701‑55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40‑35, 40‑37, 40‑40 or 40‑43 treated the joining entity as holding a notional asset. > Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705‑30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. (a) deductions under former Subdivision 330‑A, 330‑C or 330‑H of the Income Tax Assessment Act 1997, or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated an entity as holding because of the expenditure. (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); > Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40‑75(4) of this Act, but may have been reset since under Subdivision 40‑B of the Income Tax Assessment Act 1997. > Note 2: The effective life of a notional asset is specified by whichever one of sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act is relevant to the notional asset. (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (9) Section 705‑55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705‑45 of that Act. > Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705‑40 of the Income Tax Assessment Act 1997. ## 705‑310 Adjustable value of head company 705‑310 Adjustable value of head company’s notional assets (a) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701‑5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. > Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705‑305(3). ## Division 707 Losses for head companies when entities become members etc. ## Subdivision 707 ‑A—Transfer of losses to head company ## 707‑145 Certain choices to cancel the tr 707‑145 Certain choices to cancel the transfer of a loss may be revoked (ii) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707‑A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member. ## Subdivision 707 ‑C—Amount of transferred losses that can be utilised 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value ## 707‑325 Increasing the available fractio 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value #### 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707‑320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor) other than the real loss‑maker mentioned in subsection 707‑315(1) of that Act for the bundle; and (b) both the real loss‑maker and the value donor became members of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (ca) neither the real loss‑maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (ii) a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (ii) section 713‑540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (2) It must have been possible for the real loss‑maker to have transferred the loss to the value donor under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss‑maker at the initial transfer time the amount worked out using the formula:  > Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707‑327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss‑maker to the transferee. > total of real loss‑maker’s non‑foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss‑makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) included in a bundle of losses: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. ## 707‑326 Events involving only value dono 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value #### 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value (1) This section affects the calculation of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707‑325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936, in the bundle). > Note: This section does not affect the calculation of the real loss‑maker’s modified market value for other purposes (such as the real loss‑maker being a value donor for the purposes of another application of section 707‑325 of this Act). (3) One condition is that the event was an injection of capital directly into the real loss‑maker by the value donor mentioned in section 707‑325 of this Act. (c) that would have caused subsection 707‑325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss‑maker’s modified market value (even if no other events described in subsection 707‑325(4) of that Act had occurred), apart from this section. (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss‑maker (whether or not the event also involved either the value donor or the real loss‑maker); or ## 707‑327 Choosing available fraction to a 707‑327 Choosing available fraction to apply to value donor’s loss (1) This section has effect for the purposes of working out under Subdivision 707‑C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707‑325, as if there were added to the modified market value of the real loss‑maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (c) the loss is not a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707‑A of that Act at the initial transfer time had the company: > Note: This section has effect even if the amount added to the real loss‑maker’s modified market value under section 707‑325 is nil because the value donor’s modified market value is nil. (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707‑325, as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (4) If the transferee mentioned in subsection 707‑325(1) chooses, sections 707‑310, 707‑335 (except paragraph 707‑335(2)(a)) and 707‑340 of the Income Tax Assessment Act 1997 (and subsections 707‑315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: > Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707‑325(1)(d) and (e) and subsection 707‑325(2) in an application of section 707‑325 separate from the application of that section mentioned in paragraph (1)(a) of this section. > Note: This means that a loss that provided a basis for section 707‑325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. ## 707‑328 Income year and conditions for p 707‑328 Income year and conditions for possible transfer under Division 170 of the Income Tax Assessment Act 1997 (b) in connection with the requirement that it must have been possible for a company (the notional transferor) to transfer to another company (the notional transferee) for an income year a loss under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997. (b) ends immediately after the initial transfer time mentioned in subsection 707‑320(1) of the Income Tax Assessment Act 1997. > Note: For the purposes of identifying the trial year using the definition in section 707‑120 of the Income Tax Assessment Act 1997, the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time. ## 707‑328A Some events involving only grou 707‑328A Some events involving only group members not covered by rule against inflation of modified market value (1) Subsection (3) of this section affects the calculation, under section 707‑325 of the Income Tax Assessment Act 1997 and section 707‑325 of this Act, of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (the formation time) the group became a consolidated group; and (b) the provisions described in subsection 707‑327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707‑327(1)(b) and (c) of this Act as if the bundle included the loss; and (d) subsection 707‑325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707‑325(1) of this Act chooses that this section apply in relation to the real loss‑maker. (2) Section 707‑325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. (3) Disregard for the purposes of subsection 707‑325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707‑325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or > Note: Disregarding such an event could have a direct or indirect effect on the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss‑maker’s modified market value calculated under section 707‑325 of the Income Tax Assessment Act 1997, if the real loss‑maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707‑325 of this Act to add an amount to the real loss‑maker’s modified market value for those purposes. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) that: (b) was transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from an entity other than the real loss‑maker. (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997. ## 707‑329 Modified market value at a time 707‑329 Modified market value at a time before 8 December 2004 Disregard an event that is described in subsection 707‑325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707‑325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004. ## 707‑350 Alternative loss utilisation reg 707‑350 Alternative loss utilisation regime to Subdivision 707‑C of the Income Tax Assessment Act 1997 (1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss‑maker) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time) the transferee became the head company of a consolidated group; and (ii) the conditions in one or more of paragraphs 165‑15(1)(a), (b) and (c) did not exist in relation to the real loss‑maker; and (da) the real loss‑maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non‑transferred losses) of the same sort that the transferee made without a transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non‑transferred losses). (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. <table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Limit on utilising the losses</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For this income year:</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the losses that the transferee may utilise cannot exceed:</span></p></td></tr></thead><tbody><tr><td style="width:20.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:120.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The first income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span style="font-size:8pt; vertical-align:2pt">1</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The second income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) </span><span style="font-size:8pt; vertical-align:2pt">2</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the amount of the losses utilised for the income year mentioned in item</span><span> </span><span>1</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The third income year ending after the initial transfer time, or a later income year</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time</span></p></td></tr></tbody></table> ``` (4) Subdivision 707‑C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707‑A of that Act. > Note: This has 2 effects. First, Subdivision 707‑C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707‑A of that Act). (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). (7) This section does not limit the transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company. ## 707‑355 Ignore certain losses in working 707‑355 Ignore certain losses in working out when a choice can be made under this Subdivision In working out when a choice may be made under subsection 707‑325(5), 707‑327(5), 707‑328A(4) or 707‑350(5), ignore losses to which section 713‑535 of the Income Tax Assessment Act 1997 applies. > Note: That section deals with losses transferred under Subdivision 707‑A of that Act from certain wholly‑owned subsidiaries of life insurance companies that are members of a consolidated group. ## Subdivision 707 ‑D—Special rules about losses ## 707‑405 Special rules about losses refer 707‑405 Special rules about losses referable to part of income year Section 707‑405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act. ## Division 709 Other rules applying when entities become subsidiary members etc. ## Subdivision 709 ‑D—Deducting bad debts ## 709‑200 Application of Subdivision 709‑D 709‑200 Application of Subdivision 709‑D of the Income Tax Assessment Act 1997 ## Division 712 Certain rules for where entities cease to be subsidiary members of consolidated groups ## Subdivision 712 ‑E—Expenditure relating to exploration, mining or quarrying ## 712‑305 Reducing adjustable value of hea 712‑305 Reducing adjustable value of head company’s notional asset (1) This section reduces the adjustable value of a notional asset that section 40‑35, 40‑37, 40‑38, 40‑40 or 40‑43 treats the head company of a consolidated group as holding, if: (b) that section treats the leaving entity as holding a notional asset because of section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997. > Note: Section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time. ## Division 713 Rules for particular kinds of entities ## Subdivision 713 ‑L—Transitional relief for certain transactions relating to life insurance companies ## 713‑500 Object of Subdivision 713‑500 Object of Subdivision The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences. ## 713‑505 When this Subdivision applies (f 713‑505 When this Subdivision applies (first case) (1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event) happening involving an entity (the originating entity) and another entity (the recipient entity) if: (a) the event occurs in connection with a life insurance company (the member life insurance company) becoming a member of a consolidated group; and (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest) in a company or in another trust. ## 713‑510 When this Subdivision applies (s 713‑510 When this Subdivision applies (second case) (a) a life insurance company transfers an asset (also the original asset) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320‑200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset) to its segregated exempt assets where, apart from this Subdivision, section 320‑255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event) is made in connection with the life insurance company (also the member life insurance company) becoming a member of a consolidated group. ## 713‑515 Entities must choose the relief 713‑515 Entities must choose the relief (1) This Subdivision applies only if the originating entity (for a section 713‑505 case) or the life insurance company (for a section 713‑510 case) chooses that it apply. (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or ## 713‑520 Conditions 713‑520 Conditions (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713‑510 of the Income Tax Assessment Act 1997; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713‑510 of the Income Tax Assessment Act 1997; and (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs. ## 713‑525 Time of transfer 713‑525 Time of transfer This Act, and the Income Tax Assessment Act 1997, apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group. ## 713‑530 What the relief is 713‑530 What the relief is (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain) that the originating entity would have made as a result of the deferral event is disregarded; and (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount) under paragraph 320‑15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. ## 713‑535 Subsequent consequences 713‑535 Subsequent consequences (1) This section operates if, after the deferral event happens, another event (the new event) happens where the new event is: (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (i) the original asset being transferred to or from the company’s virtual PST under section 320‑180, 320‑185 or 320‑195 of the Income Tax Assessment Act 1997; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320‑235, 320‑240 or 320‑250 of that Act; or (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. > Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713‑505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. ## 713‑540 Requirement to notify happening 713‑540 Requirement to notify happening of new event (1) For a section 713‑505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. ## 713‑545 Discount capital gain in certain 713‑545 Discount capital gain in certain cases The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713‑535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: ## Subdivision 713 ‑M—General insurance companies ## 713‑700 Application 713‑700 Application ## Division 715 Interactions between the consolidation rules and other areas of the income tax law ## Subdivision 715 ‑F—Interactions with Division 230 (financial arrangements) ## 715‑380 Exit history rule not to affect 715‑380 Exit history rule not to affect certain matters related to Division 230 financial arrangements (a) an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group at a time (the leaving time); and (b) but for the cessation of membership and section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time. ## Subdivision 715 ‑J—Entry history rule and choices ## 715‑658 Application 715‑658 Application ## 715‑659 Extension of time for making cho 715‑659 Extension of time for making choice if joining time was before commencement (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision. ## Subdivision 715 ‑K—Exit history rule and choices ## 715‑698 Application 715‑698 Application ## 715‑699 Extension of time for making cho 715‑699 Extension of time for making choice if leaving time was before commencement (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision. ## Division 716 Miscellaneous special rules ## Subdivision 716 ‑G—Software development pools ## 716‑340 Expenditure incurred before 1 Ju 716‑340 Expenditure incurred before 1 July 2001 and allocated to a software pool Sections 716‑340 and 716‑345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. <table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:345.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Extended operation of sections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 1</span><br><span style="font-weight:bold">Sections</span><span style="font-weight:bold"> </span><span style="font-weight:bold">716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">340 and 716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">345 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> operate in relation to:</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 2</span><br><span style="font-weight:bold">In the same way as they operate in relation to:</span></p></td></tr></thead><tbody><tr><td style="width:5.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:161.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>46</span><span>‑</span><span>90 of that Act</span></p></td><td style="width:156.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>40</span><span>‑</span><span>455 of that Act</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software pool created under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure allocated to a software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Software, expenditure on which was in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>In</span><span>‑</span><span>house software, expenditure on the development of which is allocated to a software development pool</span></p></td></tr></tbody></table> ``` ## Division 719 MEC rules ## Subdivision 719 ‑A—Modified application of Part 3‑90 to MEC groups ## 719‑2 Modified application of Part 3‑90 719‑2 Modified application of Part 3‑90 to MEC groups (1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: ## Subdivision 719 ‑B—MEC groups and their members ## 719‑5 Debt interests that are not member 719‑5 Debt interests that are not membership interests Section 703‑30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. ## 719‑10 Effect of Division 701C 719‑10 Effect of Division 701C (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004. ## 719‑15 Modified effect of subsection 701 719‑15 Modified effect of subsection 701D‑10(2) (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time) a wholly‑owned subsidiary of the entity that became the head company of the group (the head entity), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier‑1 company of the group at the formation time. ## 719‑30 Employee share schemes 719‑30 Employee share schemes Despite the amendment of section 719‑30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. ## Subdivision 719 ‑C—Cost setting ## 719‑160 Transitional cost setting rules 719‑160 Transitional cost setting rules on joining have effect with modifications (1) Section 719‑160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719‑160(3) of the Income Tax Assessment Act 1997. (3) However, that effect of section 719‑160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division. ## 719‑161 Modified effect of section 701‑1 719‑161 Modified effect of section 701‑1 (2) Paragraphs 701‑1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier‑1 company at the time the MEC group came into existence. (a) the entity and one or more other entities were members of a potential MEC group as eligible tier‑1 companies, throughout the period: (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: ## 719‑163 Modified effect of section 701‑3 719‑163 Modified effect of section 701‑35 (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: ## 719‑165 Modified effect of paragraph 701 719‑165 Modified effect of paragraph 701‑45(1)(b) (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier‑1 company, at the time the transitional group came into existence. ## Subdivision 719 ‑F—Losses ## 719‑305 Available fraction for bundle of 719‑305 Available fraction for bundle of losses not affected by concessional rules To avoid doubt, sections 707‑325 and 707‑327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719‑305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707‑A of that Act. ## 719‑310 Certain choices may be revoked 719‑310 Certain choices may be revoked Subsection 719‑325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006. ## Subdivision 719 ‑I—Bad debts ## 719‑450 Application of Subdivision 719‑I 719‑450 Application of Subdivision 719‑I of the Income Tax Assessment Act 1997 ## Division 721 Liability for payment of tax where head company fails to pay on time ## Subdivision 721 ‑A—Application of Division ## 721‑25 References in tax sharing agreeme 721‑25 References in tax sharing agreements to former table item 25 (1) A reference in an agreement to item 25 of the table in subsection 721‑10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: ## Part 3 ‑95—Value shifting (a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and (2) Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001 (the new Act) applies to the plant on this basis: (a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant’s opening adjustable value; and (b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and (c) if you excluded an amount from your assessable income under section 42‑290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999—the cost of the plant, and its opening adjustable value, are reduced by that amount; and (d) if subparagraph (1)(b)(ii) applies to you—you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi‑owner of the plant under the former Act continue. (3) If you were using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis: (a) for the diminishing value method—replace the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate you were using; and (i) replace the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate you were using; and (ii) increase the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note 1: Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced. > Note 2: Small business entities can choose to work out the decline in value of their depreciating assets under Division 328. (a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or (3) If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40‑70(1) or 40‑75(1) of the new Act that includes the plant’s effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and (2) For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets. (3) For a case where the plant is merged into another depreciating asset, section 40‑125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it. (b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day. (a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and (a) you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and (b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU’s opening adjustable value. (1) Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001. (2) For a unit of software for which you were deducting amounts under Subdivision 46‑B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis: (d) you must use the same effective life you were using under Subdivision 46‑B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001. (1) This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day. (b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and (c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and (1) This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001. > Note: Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8). (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330‑80 of the former Act for your income year ending on 30 June 2001; and (c) in applying the formula in section 40‑75 of the new Act for the income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The remaining effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these: (i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; (ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these: (i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and (ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (7) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and (b) the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or (c) for an amount of expenditure incurred in carrying on eligible quarrying operations—the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year. (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (i) you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day) after 30 June 2001; or (ii) the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day) after 30 June 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for the income year in which the start day occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is: (a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or (b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year. there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (1) This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330‑H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001. (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (a) it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and (c) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (i) any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset); (i) any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (4) of this section, then: (a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (4) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or (b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it. (b) the expenditure would have been transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330‑H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and (2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis: (b) in applying the formula in section 40‑75 of the new Act for your income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and (d) it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330‑395 of the former Act; and (a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property); (b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose; there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property. (5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income: (a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or (b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or (c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act. (1) Despite subsections 40‑35(5), 40‑38(5) and 40‑40(4), there is no additional decline in the value of the notional asset referred to in those subsections if: (a) apart from this section, subsection 40‑35(5), 40‑38(5) or 40‑40(4) would apply because the real asset referred to in that subsection is disposed of; and (a) at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373‑35 of the former Act; and (b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day. (a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and (1) Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time). (2) Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time. (a) you have deducted or can deduct an amount under Subdivision 387‑G of the former Act for an amount (the qualifying amount) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and (b) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and (e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and (1) This section applies to you if you have deducted or can deduct an amount under Subdivision 400‑A of the former Act for an amount (the qualifying amount) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400‑A of the former Act. (a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and (c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400‑15(3) of the former Act; and (1) Units of plant that you had allocated to a pool under Subdivision 42‑L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act. (a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and (c) in applying the formula in section 40‑70 of the new Act for your income year in which 1 July 2001 occurs—it has a base value equal to that opening adjustable value; and (d) you replace the component in the formula in subsection 40‑70(1) of the new Act that includes an asset’s effective life with the pool percentage you were using for the pool; and (e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40‑115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and (f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset. (3) An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item). > Note 1: You work out the decline in value of an item removed under this subsection under Subdivision 40‑B of the new Act, using the cost for it worked out under section 40‑205 of the new Act. (b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset. (2) The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year) in this way: (a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and (b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section. (a) for a unit of plant (including IRUs and expenditure on software that is not pooled)—its undeducted cost at the end of 30 June 2001; or (b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence—the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or (c) for transport capital expenditure—the entity’s amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or (d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (e) for expenditure on evaluating the impact on the environment of a project—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or (f) for assets that were pooled under Subdivision 42‑M or 42‑L of the former Act—the closing balance of the pool at the end of 30 June 2001. (4) The asset’s base value for applying the formula in section 40‑70 of the new Act for the diminishing value method is that opening adjustable value. (5) The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an item of plant for which you were using the prime cost method—using the rules in section 40‑10 of this Act; and (c) for a unit of software for which the entity was deducting amounts under Subdivision 46‑B of the former Act—using the rules in subsection 40‑25(2) of this Act; and (f) for an amount of expenditure on evaluating the impact on the environment of a project—using the rules in section 40‑55 of this Act. (6) The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way: (a) for an amount of unrecouped expenditure under Division 330 of the former Act—using the rules in section 40‑35 of this Act; and (b) for an amount of transport capital expenditure under Division 330 of the former Act—using the rules in section 40‑40 of this Act; and (7) The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act. (a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑C of the former Act; or (b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑H of the former Act; or (c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387‑B of the former Act; or (d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; or (e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365. (9) The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001. (10) You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount). (11) You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount. (1) Subsections 40‑65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened: (b) you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act. (a) paragraph 40‑65(6)(a) of the Income Tax Assessment Act 1997 included both events set out in subsection (1) of this section; and (b) subsections 40‑65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events. (1) A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936. (2) An amount you have deducted or can deduct for a water facility under Subdivision 387‑B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40‑F of the new Act. (3) A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936. (a) you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40‑115 (about splitting a depreciating asset) or 40‑125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and (b) it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40‑72 of that Act; (2) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if: (c) it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40‑72 of that Act. (3) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset) before 10 May 2006 if: (b) the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and (d) it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40‑72 of that Act. (a) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you: (b) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001. (2) If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act. (3) Otherwise, Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section. (a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or (b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining—the shorter of: (ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or (ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life. (1) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001. > Note: If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40\. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997. (1A) Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001. (1B) Subsection (1) applies to a mining, quarrying or prospecting right (the new right) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if: (i) the other company is a member of the same wholly‑owned group as the original holder and was a member of that group just before that day; and (ii) the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer. (1D) Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if: (b) the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001. (a) you acquired, under an interest realignment arrangement, an interest (a new interest) in a mining, quarrying or prospecting right; and (b) the interest was acquired in exchange for one or more other interests (old interests) in other mining, quarrying or prospecting rights; and Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001. (a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or (b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership; the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act. (3) An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that: (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act. (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act. (6) Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243. (7) An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if: (a) you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and (8) The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section. (c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act. (2) Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001. A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act. if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011. (2) The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011. (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset for an income year is the amount worked out under section 40‑130 if: (a) the income year is the year in which you start to use the asset, or have it installed ready for use, for a taxable purpose; and (b) subsection (2) (about businesses with turnover less than $500 million) applies to you for the year and for the income year in which you started to hold the asset (if that was an earlier year); and > Note 1: An effect of paragraph (1)(a) is that this Subdivision only applies to one income year per asset. See also subsection 40‑135(1). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $500 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. Exception—assets for which the decline in value is worked out under section 40‑82 or Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (3) However, this section does not apply to a depreciating asset for an income year if you work out the decline in value of the asset for the income year under any of the following: (1) For the purposes of paragraph 40‑120(1)(c) and section 328‑182, you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you: > Note: Section 328‑182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997. (i) entering into a contract under which you hold the post‑12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑12 March 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post‑12 March 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (8) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (9) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (10) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (1) For the purposes of section 40‑120, the decline in value for the income year in which paragraph 40‑120(1)(a) is satisfied (the current year) is: > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 12 March 2020 to 30 June 2020 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2020 to 30 June 2021. (a) 50% of the asset’s cost as at the end of the current year, disregarding any amount included in the second element of the asset’s cost after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997, assuming its cost were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (3) However, the amount worked out under subsection (2) for an income year cannot be more than the amount that is the asset’s cost for the year. (a) 50% of the sum of the asset’s opening adjustable value for the current year and any amount included in the second element of its cost for that year, disregarding any amount included in that second element after 30 June 2021; (b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997 assuming: (ii) for the prime cost method—the component “Asset’s \*cost” in the formula in subsection 40‑75(1) of that Act (as adjusted under that section) were reduced by the amount worked out under paragraph (a). > Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021. (b) for the prime cost method—the sum of its opening adjustable value for the income year and any amount included in the second element of its cost for that year. (1) The decline in value of a depreciating asset is not worked out under this Subdivision for an income year if this Subdivision already applied in working out the decline in value of the asset for an income year. (2) For an income year later than the year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (3) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (4) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) You may choose that the decline in value of a particular depreciating asset for an income year, and subsequent income years, is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the first income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. If this Subdivision applies to work out the decline in value of a depreciating asset you hold for an income year, no other provision of this Act or the Income Tax Assessment Act 1997 applies to work out that decline in value. (1) For the purposes of this Subdivision, you are covered by this section for a depreciating asset if, on or before 30 June 2023: (2) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (3) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose: (a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or Exception—assets for which the decline in value is worked out under Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (a) the asset is allocated to a low‑value pool, or expenditure on the asset is allocated to a software development pool (see Subdivision 40‑E of the Income Tax Assessment Act 1997); or (b) you or another taxpayer has deducted or can deduct amounts for the asset under Subdivision 40‑F of the Income Tax Assessment Act 1997 (about primary production depreciating assets). (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $5 billion; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this section. (ii) if the 2019‑20 income year ends on or before 6 October 2020—the sum of your ordinary income (if any) and statutory income (if any) for the 2019‑20 income year; and (c) the sum of the amounts worked out under subsection (3) for the 2016‑17, 2017‑18 and 2018‑19 income years exceeds $100 million. (b) next, work out the cost of each of those assets (including any amounts included in the second element of the asset’s cost at a time that is in the income year); (4) For the purposes of subsection (3), disregard an asset if, at the time you first used the asset, or had it installed ready for use, for a taxable purpose: (a) it was not reasonable to conclude that you would use the asset principally in Australia for the principal purpose of carrying on a business; or (5) For the purposes of paragraph (3)(b), to work out the cost of a depreciating asset that is capital works (see section 43‑20 of the Income Tax Assessment Act 1997): (a) disregard section 40‑45 of that Act and work out the cost of the capital works using Subdivision 40‑C of that Act; and (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under subsection (3) if: (a) where section 40‑155 covers you for the current year (regardless whether section 40‑157 also covers you for the current year)—an exclusion applies to you and the asset for the current year under section 40‑165 (about exclusions for businesses with turnover of $50 million or more); or (ii) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s start time occurs in the current year—the asset’s cost as at the end of the current year, disregarding any amount included in the asset’s cost after 30 June 2023; or (b) if the asset’s start time occurred in an earlier year—the sum of its opening adjustable value for the current year and any amount included in the second element of its cost for the current year, disregarding any amount included in the asset’s cost after 30 June 2023. > Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997. > Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 6 October 2020 to 30 June 2021 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2021 to 30 June 2022. (a) where paragraph 40‑160(2)(a) applies—section 40‑155 would not cover you for the income year if the reference in that section to $5 billion were instead a reference to $50 million; and (i) entering into a contract under which you hold the post‑6 October 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑6 October 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and (d) you engage in that conduct for the purpose, or for purposes that include the purpose, of satisfying paragraph 40‑160(1)(a) for the post‑6 October 2020 asset. (4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time. (5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. (6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you already satisfied paragraph 40‑160(1)(a) of this Act for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (9) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you. (1) For the purposes of subsections 40‑160(2) and 40‑170(1A), an exclusion applies to you and an asset for an income year if any of the exclusions in this section applies in relation to the asset. (4) This exclusion applies in relation to the asset if the asset is available for use, at any time in the income year, by any of the following: (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under this section if: (ii) you started to use the asset, or have it installed ready for use, for a taxable purpose in an earlier income year; and (b) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under section 40‑82 of the Income Tax Assessment Act 1997—the amount worked out under subsection (3); or (b) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under Subdivision 40‑BA of this Act—the amount worked out under subsection (4); or Assets affected by section 40‑82 of the Income Tax Assessment Act 1997 (about assets costing less than $150,000, medium sized businesses) (a) the amount that would be the asset’s decline in value for the year under section 40‑82 of the Income Tax Assessment Act 1997, assuming the reference in subparagraph 40‑82(3A)(b)(ii) of that Act to 31 December 2020 were instead a reference to the 2020 budget time; and (a) the amount that would be worked out under paragraph 40‑130(2)(a) or (4)(a) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(a) and (4)(a) to 30 June 2021 were instead references to the 2020 budget time; and (c) the amount that would be worked out under paragraph 40‑130(2)(b) or (4)(b) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(b) and (4)(b) to “the amount worked out under paragraph (a)” were instead references to “the amounts worked out under paragraphs 40‑170(4)(a) and (b)”. (a) the amount that would be the asset’s decline in value for the year under Division 40 of the Income Tax Assessment Act 1997, disregarding any amounts included in the eligible second element worked out under section 40‑175 of this Act for the asset for the year; and The amount worked out under this section (the eligible second element) for a depreciating asset for an income year is the sum of any amounts included in the second element of the asset’s cost at a time that is in both of the following periods: (1) For an income year later than a year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997. (2) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (3) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act. (1) This section applies if the decline in value for a depreciating asset for an income year is worked out under this Subdivision, and at a time (the balancing adjustment time) in a later income year: (i) it becomes not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (b) none of the requirements in paragraphs 40‑295(1)(a), (b) or (c) of the Income Tax Assessment Act 1997 are satisfied in relation to the asset. (2) For the purposes of Subdivision 40‑D of the Income Tax Assessment Act 1997 assume that, at the balancing adjustment time, you stop using the asset, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again. (3) For the purposes of section 40‑180 of the Income Tax Assessment Act 1997 assume that the reference in item 3 of the table in subsection 40‑180(2) of that Act to “because you stop using it for any purpose expecting never to use it again” were instead a reference to “because of section 40‑185 of the Income Tax (Transitional Provisions) Act 1997”. (4) If a balancing adjustment event happens to a depreciating asset you hold because of this section, this Subdivision cannot apply to work out the decline in value of the asset for a later income year. (1) You may choose that the decline in value of a particular depreciating asset for an income year is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year. (1) Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40. (a) you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset: (ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and (4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day. (5) The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if: (i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or (ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and  > sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose. (7) Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens: (a) if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b). (i) an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and (ii) the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and (3) The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount. (a) on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and (c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and (ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal; (2) There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal. (3) Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount. If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997. (a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and (b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and: (i) the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, the R&D entity is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—a clawback amount under section 355‑447 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑466 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. (b) section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions. > Note 2: The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and: (i) the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset; (ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, an R&D entity (the partner) that is a partner in the R&D partnership and is entitled to one or more new law deductions for one or more income years for the asset, is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—a clawback amount under section 355‑449 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑468 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s new law deductions mentioned in paragraph (2)(b) of this section. (4) Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event. > Note: Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions. (1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant. (b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and (3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it. (a) there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and (b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act. (2) The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor. (3) The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and <table cellspacing="0" cellpadding="0" style="width:364.2pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:353.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading" style="page-break-inside:avoid"><span>Conditions for small business taxpayers retaining accelerated rates</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Condition</span></p></td></tr></thead><tbody><tr><td style="width:21.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:321.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>The transferee must have been a small business taxpayer for the income year (the </span><span style="font-weight:bold; font-style:italic">start year</span><span>) that includes the time when the entity first used the plant, or first had it installed ready for use.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>2</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>At that time, neither of these applies:</span></p><p class="Tablea"><span>(a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;</span></p><p class="Tablea"><span>(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection</span><span> </span><span>(5).</span></p></td></tr></tbody></table> ``` (4) For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership. (5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement. (a) for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or (i) replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and (ii) increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).  (b) if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11). (c) that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and (d) that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and (e) that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity. (a) for taxable supplies (if any) the entity makes during the year in the course of carrying on a business—the value (as defined by section 9‑75 of the GST Act) of the supplies; and (b) for other supplies the entity makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies. (1) The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for: (a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (c) for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or (d) for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant. (3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115. (4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain. (5) Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee. (i) the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or (a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and (1) A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act. (2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year. For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if: Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act. (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset): and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply. (i) for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or (ii) for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and (c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act. (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and (2) Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act. The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under: (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on: (2) You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act. (3) A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under: (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and (2) Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act. A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act. The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001. If: (d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act; (a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and (a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and (b) the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and (c) paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997. Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years. (1) For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section. (b) the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (b) that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest. (a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or (1) There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea" style="page-break-after:avoid"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a); and</span></p><p class="Tablea" style="page-break-after:avoid"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>85(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>145(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (b) disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3). <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Consequences for transition entities</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">There are these consequences:</span></p></td></tr></thead><tbody><tr><td style="width:22.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:91.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant</span></p></td><td style="width:218.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>215(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr><tr><td style="width:22.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:91.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The entity chooses, under section</span><span> </span><span>58</span><span>‑</span><span>155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre</span><span>‑</span><span>existing audited book value of plant</span></p></td><td style="width:218.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tablea"><span>(a) section</span><span> </span><span>45</span><span>‑</span><span>5 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>5(2)(b) were omitted and replaced by paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a); and</span></p><p class="Tablea"><span>(b) section</span><span> </span><span>45</span><span>‑</span><span>10 has effect as if paragraph</span><span> </span><span>45</span><span>‑</span><span>10(2)(b) operated on that part of the amount worked out under paragraph</span><span> </span><span>58</span><span>‑</span><span>270(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.</span></p></td></tr></tbody></table> ``` (f) an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division. (4) If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45‑5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest. (5) If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45‑10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest. Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Disregard the use of the following amounts in determining (for the purposes of Subdivision 50‑A of the Income Tax Assessment Act 1997 whether a fund established before 1 July 1997 operates and pursues its purposes in Australia: Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years. (2) However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date. Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if: (b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time. Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years. 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years (1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act. <table cellspacing="0" cellpadding="0" style="margin-left:56.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:258.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Application provisions for specific sections</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-size:9pt; font-weight:bold">Item</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">This section of the </span><span style="font-size:9pt; font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-size:9pt; font-weight:bold"> ...</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-size:9pt; font-weight:bold">Applies as described in this provision of this Act ...</span></p></td></tr></thead><tbody><tr><td style="width:24.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>70</span><span>‑</span><span>20</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>55(1)</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>70</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>95</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>100</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>105</span></p></td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>8</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td></tr></tbody></table> ``` (a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and (b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997. > Note: Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year. (b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997; sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997). > Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock. (3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997. (a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and (b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936; > Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal. #### 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997. (1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year. (2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936. (3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year: (a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners; (b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed. > Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year. > Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year. (b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year; the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year. (2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. (3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2). #### 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997. #### 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business (1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. (2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity. > Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997. (1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. (2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value. > Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997. #### 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year. (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. > Note: Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. > Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given). (5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act). (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment. > Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%. (5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%. (6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.  > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section. (b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4). Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age. Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later. Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies. Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3. (4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997. (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%. > Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986. (5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D. > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. (a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and (b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year). (3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and (2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual: (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income. > Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F. > Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997. > Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997. #### 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 (1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012. (2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies. (3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act. (b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009. (2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if: (i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest; (iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or (i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest; (iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009. (2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time. (4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2): (a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and (b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being: (ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and (c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and (d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if: (i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or (ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and (e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and (i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and (ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and (g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest. (a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced: (i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or (ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and (b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5. (2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right. (3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right. (2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. (3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section. Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years. (1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision. > Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision). > Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936). > Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997. (a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936. (1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936. (2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997. > Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997. (3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and (d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; (f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time. > Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and (d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015. (a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or (4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if: (b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset. The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year. (a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and (1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied: (b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and (d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works). (3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936. Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936. (b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006. (2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement. > Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement. Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual: (b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her. 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act (1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee). (2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year: (3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection. #### 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997. Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936). (2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if: (a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; (a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011); (b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986. > Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section. If: (a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and (b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936; Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995. (1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997. (2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997. (3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997. (4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997. > Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one. Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year: (a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and (b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year; the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation. Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset. (b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section); > Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply. (1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if: (a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and (2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value. (4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value. (a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997. (2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less. (1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936: (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. (1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if: (2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by: (a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or (a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or (2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period. Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year: If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997. (1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002. (2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset. (3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required. (i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and (ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and (c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and (f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997). (a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or (1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:  > total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part. (a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or (2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section. (3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1). (1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences. > Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997. (c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets). (4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act. (5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act. Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement. (a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and (2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time. (a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and (ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs. (2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer. (a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and (b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest; (2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event. (3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly. (4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly. <table cellspacing="0" cellpadding="0" style="width:362.55pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:351.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Creating a CGT asset</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">CGT event number</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Applicable amount</span></p></td></tr></thead><tbody><tr><td style="width:50.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D1</span></p></td><td style="width:290.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the incidental costs the originating company incurred that relate to the CGT event</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D2</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the option</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>D3</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred to grant the right</span></p></td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>F1</span></p></td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the expenditure the originating company incurred on the grant, renewal or extension of the lease</span></p></td></tr></tbody></table> ``` (5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day. A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision. (a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996. (b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. (b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend. (3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities. (1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company. (2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred. (3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company. (1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of: (2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of: (3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note. (1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised. (b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and (ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act. You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and (b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996. (c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and (c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over. (3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. (a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and (c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and (d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act. (3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division. Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years. A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: (1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day. (2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice. (a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and (b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and (a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and (b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and (c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group. (5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004. (6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection. (1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss): (b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions); and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time: (i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or (e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and (f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and (ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred; (2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if: (a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these: (i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset; (ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and (3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act. (a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and (b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section. (5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of: (a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and (b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset. Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. (ii) that could have been deducted, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the deduction had not been limited by the company’s income for that income year; and (ii) that could have been applied, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the application of the loss had not been limited by the company’s capital gains for that income year. 170‑C Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred #### 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years. #### 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). #### Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997. Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997. If: (a) all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (d) that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and (e) the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place. Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years. > introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament. Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day. #### Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting #### 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B. (1) The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day. (2) No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted. #### 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting (1) Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if: (a) the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and (b) none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount. (2) No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount. (1) This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account. (2) For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. > Note 2: If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60. (3) For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)). (4) For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. (5) The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if: (a) during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and (b) the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section. (a) the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and (b) during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components. (7) For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. (8) Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it: (b) the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component. (9) Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component. (10) For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:  > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002: (b) lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination; (c) a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination); (e) the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination); (f) the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination). Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period: 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows: (a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and (i) in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and (ii) in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. > Note: A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002. #### 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002: (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:23.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:87.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A franking surplus</span></p></td><td style="width:220.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.009.png" width="175" height="58" alt="Start formula Amount of the class A franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.010.png" width="190" height="56" alt="Start formula Amount of the class B franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C franking surplus</span></p></td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="line-height:normal"><img src="image.011.png" width="190" height="56" alt="Start formula Amount of the class C franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` #### 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus): (a) a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking surplus into 1997 Act franking credit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Original surplus</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Franking credit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:85.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>class A</span></p></td><td style="width:220.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.012.png" width="169" height="38" alt="Start formula Amount of the original class A surplus times start fraction 39 over 61 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.013.png" width="169" height="38" alt="Start formula Amount of the original class B surplus times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.014.png" width="169" height="38" alt="Start formula Amount of the original class C surplus times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (4) If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit): (a) a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company. (5) The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Conversion of 1936 Act franking deficit into 1997 Act franking debit</span></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Original deficit</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Franking debit generated under paragraph</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(4)(b)</span></p></td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:70.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class A</span></p></td><td style="width:235.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.015.png" width="164" height="38" alt="Start formula Amount of the original class A deficit times start fraction 39 over 61 end fraction end formula "></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class B</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.016.png" width="164" height="38" alt="Start formula Amount of the original class B deficit times start fraction 33 over 67 end fraction end formula"></p></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>class C</span></p></td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="margin-top:0pt; line-height:normal"><img src="image.017.png" width="164" height="38" alt="Start formula Amount of the original class C deficit times start fraction 30 over 70 end fraction end formula"></p></td></tr></tbody></table> ``` (2) A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if: (c) the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions. (3) The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if: (b) the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and (1) While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit. (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year. (3) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: > Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act. (1) The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account. (a) a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time; (3) If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if: (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity. #### 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If: the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time. (1) Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections. (2) If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year. Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year. Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year. (5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in: that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement. (6) The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (7) The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (2) The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (3) The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (i) are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and (a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and (b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section. (a) whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and (1) This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002. (a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and (3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded. (1) This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002; (2) If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (3) If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (4) If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. (5) If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows: (a) any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and (i) in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and (ii) in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. #### 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF.  #### 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act). (2) If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus): (a) a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF. (4) If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit): (a) a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF. This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period). (1) The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period: (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (1) The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period. (2) The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner. (3) The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5. (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and (d) the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner; the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received. (3) A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time: (1) A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends. (2) However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period. (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (a) the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed: (d) the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and (e) the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return. (2) The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day. (1) The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period. (2) The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made. Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period. (b) on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax); the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed: (c) the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and (d) the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return. (2) The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day. The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period: If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day. If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and If: (a) a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and (b) the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment; In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment. If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment. The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with. If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953. (1) Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period. (a) the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and (b) the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3); the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on: (c) if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or If: Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax. Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division. If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997. (a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day: (3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002. (a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002: > Note: As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date. (b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997. In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003. (1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year. (a) a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of: (i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time; (iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period; (2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if: (b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time: (ii) the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. > Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. > Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. (7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table: <table cellspacing="0" cellpadding="0" style="width:365.35pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount of the franking credit and the exempting debit</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">If:</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the credit and debit is:</span></p></td></tr></thead><tbody><tr><td style="width:22.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>1</span></p></td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The period starts immediately after 7.30</span><span> </span><span>pm by legal time in the Australian Capital Territory on 13</span><span> </span><span>May 1997</span></p></td><td style="width:141.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Both these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was not in surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The franking surplus in the Australian company’s franking account at the switch time</span></p></td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>All these conditions are met:</span></p><p class="Tablea"><span>(a) item</span><span> </span><span>1 does not apply;</span></p><p class="Tablea"><span>(b) the Australian company’s franking account was in surplus at the start of the period;</span></p><p class="Tablea"><span>(c) the surplus in the account at the switch time is greater than the surplus at the start of the period</span></p></td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the franking surplus in the Australian company’s franking account at the switch time; and</span></p><p class="Tablea"><span>(b) the franking surplus in the Australian company’s franking account at the start of the period</span></p></td></tr></tbody></table> ``` (a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and (b) the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period. Subdivision 235‑I of the Income Tax Assessment Act 1997 applies to assets acquired by the trustee of an instalment trust in: (1) Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years. (2) However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time). (3) The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997. Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997. (2) Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in: (1) Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that: (b) is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose. (a) if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007. > Note: To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997. (b) contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option; the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option. (3) For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5). (4) If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is: (a) the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less (b) the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest. (5) If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is: (6) If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil. (1) If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one. (2) If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year. (3) If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year. (a) for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and (b) for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year: Step 1. Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. Step 2. Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3). Step 3. If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year. > Note: Example: Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75): (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred: (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times: (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate. Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008. (a) the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and (b) the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities: (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (i) the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or (ii) the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and (f) none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made: (i) Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event; (ii) a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year. (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (b) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (c) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year #### 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year (a) the requirements set out in paragraphs 275‑610(1)(a), (b) and (c) of the Income Tax Assessment Act 1997 are satisfied in respect of an amount of non‑arm’s length income of a managed investment trust in relation to an income year; and (b) the managed investment trust became a party to the scheme mentioned in paragraph 275‑610(1)(a) of that Act before the day on which the Bill that became the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 was introduced into the House of Representatives; and Division 276 of the Income Tax Assessment Act 1997 as inserted in that Act by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (the amending Act) applies as set out in subitem 1(1) of Schedule 8 to the amending Act. (b) if the trustee of the trust has made a choice for the purposes of paragraph 1(1)(b) of Schedule 8 to the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016—the first income year starting on or after 1 July 2015; or (c) if the trustee of the trust has made a choice for the purposes of subparagraph 276‑10(1)(e)(i) of the Income Tax Assessment Act 1997 in respect of the 2016‑17 income year—that income year. (c) the trust is an AMIT for an income year (the discovery year) that is the starting income year or a later income year. (1) This section applies if the trust has an under or over of a character in the discovery year relating to the base year. (b) if, at a time, the trust sent its members distribution statements for an income year that is prior to the starting income year—assume that the trust sent those members AMMA statements for that income year at that time. (3) For the purposes of Division 276 of the Income Tax Assessment Act 1997, treat the under or over mentioned in subsection (1) as an under or over of the AMIT, in the discovery year relating to the base year, of the character mentioned in that subsection. (a) had the under or over mentioned in subsection (1) been discovered before the starting income year, this Act would have operated to produce a particular effect (the pre‑AMIT scheme effect) for the base year in relation to the amount or amounts reflected in the under or over; and 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT #### 276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT (b) working out the amount (if any) of the entity’s capital gain under subsection 104‑70(4) of the Income Tax Assessment Act 1997. (3) For the purpose of working out the amount of the non‑assessable part mentioned in paragraph 104‑70(1)(b), treat the following provisions as being in operation at the time the payment was made: (b) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in paragraph (a). (4) Subsection (3) does not apply to the extent (if any) that the entity, in the income tax return that it lodged for the income year in which the payment was made, included the amount of the payment in its assessable income for that income year. (5) For the purposes of section 118‑20 of the Income Tax Assessment Act 1997, treat this section as being in Part 3‑1 of that Act. (2) The Commissioner cannot amend the entity’s assessment for the income year in which the payment was made in a particular way if: (b) the Commissioner could not amend the assessment in that way if the following provisions were in operation at the time the payment was made: (ii) any other provision of that Act, to the extent that it relates to the operation of the provisions mentioned in subparagraph (i); and Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82‑10F). (2) The object of this section is to apply (with modifications) provisions limiting deductibility in respect of certain contributions made during the period that: (a) Subdivisions AA and AB of Division 3 of Part III of the Income Tax Assessment Act 1936, as in force just before they were repealed by the Superannuation Legislation Amendment (Simplification) Act 2007; (b) any other provision of the Income Tax Assessment Act 1936, or of any instrument made under that Act, to the extent that it relates to the operation of those Subdivisions; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of those Subdivisions. (b) the deduction limit mentioned in section 82AAC for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (c) the deduction limit mentioned in section 82AAT for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and (d) Division 290 of the Income Tax Assessment Act 1997 did not apply to contributions made during the income year mentioned in paragraph (a). (2) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of a defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection and subsection (4), the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 5 September 2006; (b) the defined benefit interest mentioned in paragraph (2)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 5 September 2006, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (2)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (4) Despite subsection 291‑170(1) of the Income Tax Assessment Act 1997, your notional taxed contributions for the financial year in respect of the defined benefit interest are equal to your basic concessional contributions cap for the financial year if: (a) Subdivision 291‑C of that Act applies in relation to you because you have a defined benefit interest in a financial year; and (b) disregarding this subsection, the notional taxed contributions for the financial year in respect of the defined benefit interest exceed your basic concessional contributions cap for the financial year; and > Note: In some cases, section 291‑370 of the Income Tax Assessment Act 1997 has the effect of replacing this subsection with a similar rule covering a broader class of contributions and amounts. (a) you held a defined benefit interest (the original interest) in a superannuation fund (the original fund) on 12 May 2009; (b) the defined benefit interest mentioned in paragraph (4)(a) (the current interest) is in a different superannuation fund (the current fund); (ii) was transferred to another superannuation interest after 12 May 2009, and was later transferred to the current interest (whether directly or through a series of transfers between superannuation interests); (d) your rights to accrue future benefits under the current interest are equivalent to your rights to accrue future benefits under the original interest; (i) the notional taxed contributions mentioned in paragraph (4)(b) do not exceed what they would have been if the transfer mentioned in paragraph (c) had not taken place; or (1) The object of this section is to apply (with modifications) provisions relating to excess non‑concessional contributions tax in respect of certain contributions made during the period that: (b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision; (c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision. (ea) in a case where paragraph 292‑95(1)(b) of that Act would have allowed the contribution mentioned in that paragraph to be made at a time within that period—that paragraph allowed the contribution to be made on or before 30 June 2007; and (f) paragraph 292‑95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and (fa) in a case where subsection 292‑100(2), (4), (7) or (8) of that Act would have allowed the contribution mentioned in that subsection to be made at a time within that period—that subsection allowed the contribution to be made on or before 30 June 2007; and (g) paragraph 292‑100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and (h) contributions made during that period that are covered under section 292‑100 of that Act reduce the person’s CGT cap amount for the 2007‑2008 financial year in accordance with subsection 292‑105(2) of that Act (and despite subsection (1) of that section); and (i) if the conditions in subsection (4) are satisfied—the person’s excess non‑concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and (b) the Commissioner gives the person a transitional release authority under subsection 292‑80A(2) in response to the application; and (c) the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292‑80B within 21 days after the date of the release authority; and (d) the superannuation provider pays the person the amount required under section 292‑80C in relation to the transitional release authority. (b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act). (6) The amount to be included in the first person’s amount of non‑concessional contributions under subparagraph (3)(b)(ii) is the sum of: (a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and (b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made. (c) under Division 295 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)), the contribution is included in the assessable income of the superannuation provider in relation to the superannuation plan to which the contribution is made; and (8) For the purposes of paragraph (7)(b), treat the person as an employee of the other entity if the person would be treated as an employee of the other entity under Division 290 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)). (1) A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007. (2) The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292‑80(3)(b)(i), the person would have excess non‑concessional contributions for the financial year mentioned in paragraph 292‑80(3)(a). (4) For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out: The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 21 days after the date of the release authority. (1) A superannuation provider that has been given a transitional release authority in accordance with section 292‑80B must pay to the person within 30 days after receiving the release authority the least of the following amounts: (a) if the person requests the provider in writing to pay a specified amount in relation to the release authority—that amount; (c) the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person in complying superannuation plans. > Note 1: Section 288‑95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection. > Note 2: Section 288‑100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority. > Note 3: For reporting obligations on the superannuation provider in these circumstances, see section 390‑65 in Schedule 1 to the Taxation Administration Act 1953. (2) The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person in complying superannuation plans. (3) Section 307‑125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section. (a) your non‑concessional contributions cap for the 2015‑2016 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsection 292‑85(7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 applies after the commencement of this section as if: (d) subsection 292‑85(6) of that Act as so amended had been applied (taking into account paragraph (c) of this subsection) for the purposes of working out your non‑concessional contributions cap for the 2016‑2017 financial year. (2) For the purposes of working out your non‑concessional contributions caps for the 2017‑2018 financial year and the 2018‑2019 financial year, if: (a) your non‑concessional contributions cap for the 2016‑2017 financial year was worked out under subsection 292‑85(4) of the Income Tax Assessment Act 1997; and subsections 292‑85(6) and (7) of that Act as amended by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 apply after the commencement of this section as if the amount worked out under subsection 292‑85(5) of that Act as so amended were $380,000. (3) To avoid doubt, this section does not affect your non‑concessional contributions cap for any financial year that ended before 1 July 2017. The tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your non‑concessional contributions (see section 292‑90 of the Income Tax Assessment Act 1997) for the financial year. (2) Subject to section 294‑55, the amendments of Division 294 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Treasury Laws Amendment (2017 Measures No. 2) Act 2017 apply on and after 1 July 2017. Despite sections 294‑30 and 294‑140 of the Income Tax Assessment Act 1997 (which are about when you have excess transfer balance), you do not have excess transfer balance in your transfer balance account on any day in the period of 6 months beginning on 1 July 2017 if: (a) the only transfer balance credits in the account in that period arose under item 1 of the table in subsection 294‑25(1) of that Act (which is about superannuation income streams you have just before 1 July 2017); and (b) the sum of those transfer balance credits exceeds your transfer balance cap, but is less than or equal to $1,700,000; and (c) at the end of the period, the sum of all the transfer balance debits arising in your transfer balance account equals or exceeds the amount of the excess from paragraph (b). (1) Despite subsection 294‑10(2), a transfer balance credit arises under item 4 of the table in subsection 294‑25(1) of the Income Tax Assessment Act 1997 only in relation to a borrowing that arises under a contract entered into on or after 1 July 2017. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2017 is treated as if it arose under a contract entered into before 1 July 2017 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) on 1 July 2017, a transfer balance debit arose in your transfer balance account under item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997; and (b) the sum of all the transfer balance credits that arise in your transfer balance account under item 1 of the table in subsection 294‑25(1) of that Act exceeds the amount that would, apart from this section, be the amount of that debit. (2) Despite column 2 of item 2 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997, the amount of the transfer balance debit is instead equal to the sum worked out under paragraph (1)(b) of this section. 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain > The object of this Subdivision is to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the following legislative changes: (a) the introduction of a transfer balance cap (as a result of Schedule 1 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016); (b) the exclusion of transition to retirement income streams (and similar income streams) from being superannuation income streams in the retirement phase (as a result of Schedule 8 to that Act). (a) starting on the start of the day on which the Bill that became the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 was introduced into the House of Representatives; and (a) at the start of the pre‑commencement period, a CGT asset of a fund is a segregated current pension asset of the fund; and (i) at a time (the cessation time) in the pre‑commencement period, the asset ceases to be a segregated current pension asset of the fund; or (ii) at the start of 1 July 2017 (also the cessation time), the asset ceases to be a segregated current pension asset of the fund because it supports a superannuation income stream covered by subsection 307‑80(3) of the Income Tax Assessment Act 1997; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (b) the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year is greater than nil; and (e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and #### 294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑115(3)(a), the fund makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the fund’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Subsection 295‑390(1) of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). > 2016‑17 non‑exempt proportion means 1 minus the proportion mentioned in subsection 295‑390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016‑17 income year. #### 294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset (i) the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997 in respect of the trust for the 2016‑17 income year; (ii) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year; and (d) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and #### 294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain (b) as a result of paragraph 294‑125(3)(a), the trust makes a capital gain in respect of the asset (disregarding this section); and (c) the trustee of the trust makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2). (b) can only be made on or before the day by which the trustee of the trust is required to lodge the trust’s income tax return for the 2016‑17 income year; and (4) The deferred notional gain is the 2016‑17 non‑exempt proportion of the amount of the trust’s net capital gain for the 2016‑17 income year determined on the assumptions that: (5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017: (6) Section 295‑400 of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5). (a) unless paragraph (b) applies—1 minus the proportion mentioned in subsection 295‑400(1) of the Income Tax Assessment Act 1997; or (b) if the trustee has made a choice under subsection 295‑400(3) of that Act—the percentage worked out by subtracting the percentage mentioned in subsection 295‑400(4) of that Act in respect of the trust for the 2016‑17 income year from 100%. This Subdivision applies to an entity that is the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust. For the purposes of this Subdivision, an asset is a 30 June 1988 asset of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust if the entity owned it at the end of 30 June 1988. > Note: Section 295‑90 of the Income Tax Assessment Act 1997 treats these assets as having been acquired on 30 June 1988. (1) The first element of the cost base of each 30 June 1988 asset of the entity’s is the greater of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). (2) The first element of the reduced cost base of each 30 June 1988 asset of the entity’s is the lesser of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day). the market value of the asset as at the end of 30 June 1988 is the average of the highest and lowest trade prices for identical assets recorded on 30 June 1988 in whichever of the following markets is applicable: (d) if, on that date, there was a State capital city market (other than the Sydney market) that recorded a higher volume of trading than the Sydney market in identical assets—that State capital city market; (2) For the purposes of this section, an asset is taken to have been listed on an Australian stock exchange on 30 June 1988 if, and only if, on that day the asset had the status of having been granted official quotation by a securities exchange within the meaning of the former Securities Industry Act 1980 or the law of a State or Territory corresponding to that former Act. (b) at any time during the period commencing at the time when the shares were acquired and ending at the end of 30 June 1988, the company paid an amount that was not a dividend to the entity in respect of the shares; (b) at any time during the period commencing at the time when the interest or unit was acquired and ending at the end of 30 June 1988, the trustee of the trust paid an amount to the entity in respect of the interest or unit, being: (i) in a case where the entity was exempt from tax for the year of income in which the payment was made—an amount that, if the entity had not been exempt from tax, would not have been the entity’s assessable income; or the cost base to the entity of the interest or unit as at 30 June 1988 is reduced by so much of the amount as is not attributable to a deduction allowed under former Division 10C or 10D of the Income Tax Assessment Act 1936. (1) Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (2) and (3) of this section apply if an entity exercises rights or options as mentioned in that section to acquire: (b) the greater of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (b) the lesser of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day). (4) The payment referred to in subsection (2) or (3) can include giving property. To the extent that the payment does, use the market value of the property in working out the amount of the payment. (1) A notice given under subsection 82AAT(1A) or (1CB) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑170 of the Income Tax Assessment Act 1997. (2) A notice given under subsection 82AAT(1C) or (1CD) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑180 of the Income Tax Assessment Act 1997. (1) A proportion of the ordinary income and statutory income of a continuously complying fixed interest ADF of an income year that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).  > Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the income year. > Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the income year. (4) A choice for the purposes of the definition of reckoning time in subsection (5) must be made on or before the date of lodgment of the income tax return of the ADF for the income year to which the choice relates, or before a later day allowed by the Commissioner. > continuously complying fixed interest ADF, in relation to an income year (the current year), means a fund that is a fixed interest complying ADF in relation to each of the following years: > current 25 May balance, in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time: (b) subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 September 1989 is to be added to the balance; (b) a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that day, made a deposit with the ADF that consisted wholly or partly of the roll‑over (as defined in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 as in force on that day) of an eligible termination payment as so defined, being an eligible termination payment that included a concessional component (as so defined). > fixed interest complying ADF, in relation to a year of income, means a complying ADF where both of the following conditions are satisfied: (a) not less than 90% of the amount that, apart from this section, would be the assessable income of the ADF of the income year (other than non‑arm’s length income or amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997) consists of any one or more of the following: (ii) any profit arising on the disposal, redemption, cancellation or maturity of a CGT asset referred to in paragraph 295‑85(3)(b) of the Income Tax Assessment Act 1997; (iii) an amount included in assessable income under Division 16E of Part III of the Income Tax Assessment Act 1936 (or would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply); (ii) virtual PST life insurance policies (as defined in the Income Tax Assessment Act 1997) issued by a life insurance company. > original 25 May balance, in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988. > reckoning time, in relation to an ADF in relation to an income year, means the beginning of the income year, or such other time during the income year as the ADF chooses in accordance with subsection (4). (6) This section does not apply to an ADF in relation to an income year unless the whole of the benefit that would accrue to the ADF from the application of this section in relation to the income year has been, or can reasonably expected to be, passed on to eligible depositors. An election made by the trustee of a complying superannuation fund under subsection 279(4) of the Income Tax Assessment Act 1936 that had effect for the income year of the fund in which 30 June 2007 occurs continues to have effect as if it had been made under section 295‑465 of the Income Tax Assessment Act 1997. Subdivisions 295‑I (no‑TFN contributions) and 295‑J (Tax offset for no‑TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006‑2007 income year ends on a day (the end day) after 1 July 2007 as if: (b) the entity’s no‑TFN contributions income for the entity’s 2007‑2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007‑2008 income year if the contributions concerned had been made in the entity’s 2007‑2008 income year. (2) Division 301 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section because you are a member of the fund in the same way as it would apply if the payments were superannuation member benefits paid to you from a complying superannuation fund. For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. Subdivision 301‑F of the Income Tax Assessment Act 1997 applies in relation to income years starting on or after 1 July 2007. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to the following in respect of an income year that starts on or before 1 July 2021: (b) the amendments of the Income Tax Assessment (1997 Act) Regulations 2021 made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023. (a) a superannuation benefit (the trigger benefit) was paid to a person in the 2020‑21 income year or an earlier income year; and (c) the trigger benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; and (2) The Commissioner cannot amend an assessment on the basis that a superannuation benefit paid to the person is a superannuation income stream benefit because of the amendments made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 if: (iii) the superannuation benefit was paid to the person because the person satisfied a condition of release specified in item 103 (permanent incapacity) of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (a) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (b) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. (1) The Minister may, by legislative instrument, make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions) that: (a) relate to the amendments or repeals made by Schedule 9 to the Treasury Laws Amendment (2022 Measures No. 4) Act 2023; and (2) Without limiting subsection (1), rules made under this section before the end of the period of 12 months starting on the day that Schedule commences may provide that provisions of that Schedule, or any other Act or instrument, have effect with any modifications prescribed by the rules. Those provisions then have effect as if they were so modified. (2) Division 302 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section after another person’s death, because the other person was a member of that fund, in the same way as it would apply if the payments were superannuation death benefits paid to you from a complying superannuation fund. For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if: (b) just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936. (2) For the purposes of Subdivision 82‑B of Division 82, Division 302 and section 303‑5 of the Income Tax Assessment Act 1997, the definition of death benefits dependant in section 302‑195 of that Act applies as if paragraphs (a) and (b) of the definition were replaced with the following paragraphs: (a) a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008 or a person who was formerly such a spouse; or (b) a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008, who is aged less than 18. (ii) a superannuation guarantee payment, a small superannuation account payment, an unclaimed money payment, a superannuation co‑contribution benefit payment or a superannuation annuity payment. (2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you at a time in the period: (i) a condition of release specified in item 107A or 207AA of the table in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994; or (ii) a condition of release specified in item 109AA of the table in Schedule 2 to the Retirement Savings Accounts Regulations 1997. (1) This section applies to a superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with section 292‑80B. (2) The superannuation benefit is not assessable income and is not exempt income to the extent that it does not exceed the amount mentioned in subsection (3). (3) The amount is the amount of excess non‑concessional contributions stated in the release authority in accordance with paragraph 292‑80A(3)(a), reduced (but not below zero) by the amount of any superannuation benefit that was not assessable income and not exempt income under a previous operation of subsection (2) in relation to the release authority. (4) The superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3). (a) you have an interest in a FIF (within the meaning of Part XI of the Income Tax Assessment Act 1936, as in force just before the commencement of item 37 of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010) (the paying fund); and (b) Subdivision 305‑B of the Income Tax Assessment Act 1997 applies in relation to the paying fund (see section 305‑55 of that Act); and (c) the paying fund transfers an amount to a complying superannuation fund in respect of you during the deduction year; and (d) you choose under section 305‑80 of the Income Tax Assessment Act 1997 that the amount, or part of the amount, is to be treated as assessable income of the complying superannuation fund; and (e) immediately before the transfer happens, there is a post‑FIF abolition surplus (within the meaning of the Income Tax Assessment Act 1936) for the paying fund in relation to you; and For the purposes of the definition of specified roll‑over amount in the Income Tax Assessment Act 1997, treat the taxable component of a directed termination payment (within the meaning of section 82‑10F) as the element untaxed in the fund of a superannuation benefit that is a roll‑over superannuation benefit. (1) This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007. > Note: This section also applies to an income stream replacing an earlier one because of an involuntary roll‑over (see section 307‑127). (2) Despite subsection 307‑125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows: (a) first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007); (b) next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits. The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit. (3) Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened: (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day; (ba) the holder of the superannuation interest is aged 60 or above on 1 July 2007, if none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; (i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or (ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day. (a) treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and (b) work out the tax free component of the superannuation interest for the purposes of section 307‑125 of the Income Tax Assessment Act 1997 under subsections (6) and (6A). (i) an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and (ii) the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time; (b) next, work out the unused undeducted purchase price (within the meaning of paragraph (a) of the definition of that term in subsection 27A(1) of the Income Tax Assessment Act 1936 just before the commencement of this section, and disregarding paragraphs (b) and (c) of that definition) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007; (c) next, work out the pre‑July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this section) of the eligible termination payment. (a) at least one superannuation income stream benefit was paid from the superannuation income stream before 1 July 1994; or (b) section 27AAAA of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007) applied to the superannuation income stream just before 1 July 2007; (7) For the purposes of paragraph (6)(c), disregard the value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment. (8) If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as: (b) if 1 or more other events mentioned in subsection (3) happened before the commutation—the time just before the earliest of those events happens. (a) references in that section to the later income stream (in relation to a time, or event happening, before the payment of that involuntary roll‑over superannuation benefit) include references to the earlier income stream; and (b) references in that section to the superannuation interest supporting the later income stream (in relation to a time, or event happening, before the payment of that benefit) include references to the earlier interest. (1) This section applies for the purposes of working out the amount of your total superannuation balance just before 1 July 2017. (2) The transfer balance mentioned in paragraph 307‑230(1)(b) of the Income Tax Assessment Act 1997 just before 1 July 2017 is taken to be equal to: (a) the sum of the transfer balance credits (if any) in your transfer balance account just after the start of 1 July 2017; less (b) the sum of the transfer balance debits (if any) arising in your transfer balance account on 1 July 2017 under item 4 of the table in subsection 294‑80(1) of that Act (about payment splits). (1) Section 307‑231 of the Income Tax Assessment Act 1997 applies in relation to borrowings that arise under contracts entered into on or after 1 July 2018. (2) For the purposes of subsection (1), a borrowing (the new borrowing) that arises under a contract entered into on or after 1 July 2018 is treated as if it arose under a contract entered into before 1 July 2018 if: (ii) covered by the exception in subsection 67A(1) of the Superannuation Industry (Supervision) Act 1993 (which is about limited recourse borrowing arrangements); and (c) the amount of the new borrowing at the time it is first made equals, or is less than, the outstanding balance on the old borrowing just before the refinancing. (a) treat a deduction made under former section 279 of the Income Tax Assessment Act 1936 as having been made under section 295‑465 of the Income Tax Assessment Act 1997 instead; and (b) treat a deduction made under former section 279B of the Income Tax Assessment Act 1936 as having been made under section 295‑470 of the Income Tax Assessment Act 1997 instead. If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007‑2008 income year is, despite subsection 307‑345(1), the total of: (b) the amount by which $140,000 exceeds the upper limit for the 2006‑2007 income year (worked out under section 159SG of that Act). Division 316 of the Income Tax Assessment Act 1997 applies in relation to demutualisations occurring on or after 1 July 2008. If: (a) any assets held by the benefit funds of a life insurance company that is a friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a complying superannuation fund; and (b) the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer; the transfer is disregarded for any purposes of the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936. (1) In working out the amount that a life insurance company can deduct, in respect of life insurance policies that are disability policies (other than continuous disability policies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income. (2) In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection (1) applies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company’s liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320‑85(4) of that Act. If: (2) If the life insurance company wishes to include a part of an approved asset in its virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑87(2) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society establishes a virtual PST in the 2000‑01 income year, the calculation of the transfer values of the company’s virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year. (1) Subsection (3) applies for the purposes of subparagraph (b)(i) of the definition of virtual PST life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 259 of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007. (2) Subsection (3) also applies for the purposes of subparagraph (b)(i) of the definition of complying superannuation/FHSA life insurance policy in subsection 995‑1(1) of the Income Tax Assessment Act 1997, as in force just after the commencement of item 47 of Schedule 7 to the First Home Saver Accounts (Consequential Amendments) Act 2008. (3) Treat an annuity as having been purchased out of a superannuation lump sum or an employment termination payment, if the annuity was purchased: (b) out of an eligible termination payment (within the meaning of the Income Tax Assessment Act 1997, as in force just before the commencement mentioned in subsection (1) of this section). (2) If the life insurance company wishes to include a part of an approved asset in its segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets. (3) If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company. (a) a life insurance company had a liability before 1 July 2000 under a life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and (c) there is a transfer of the company’s assets to the segregated exempt assets to meet that liability or that part of the liability; (d) if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or (e) if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except: > Note: This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑105(1) of that Act. (1A) If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability. (2) If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320‑225 of the Income Tax Assessment Act 1997 in the 2000‑01 income year, the calculation of the transfer values of the company’s segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year. Section 322‑25 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Part VC of the Insurance Act 1973 after 17 October 2008. 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you > new Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force after the commencement of this section. > old Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. > STS taxpayer means an STS taxpayer within the meaning of Division 328 of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section. #### 328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years (1) This section applies for the purpose of working out whether you are a small business entity (other than because of subsection 328‑110(4) of the Income Tax Assessment Act 1997) for the 2007‑08 or 2008‑09 income year. (2) You work out your aggregated turnover for the 2005‑06 or 2006‑07 income year as if the amendments made by Schedule 1 to the Tax Laws Amendment (Small Business) Act 2007 had been in force in relation to that year. (a) your aggregated turnover for the 2005‑06 income year (worked out in accordance with subsection (2)) is $2 million or more; but (b) your STS group turnover for that year (worked out under Subdivision 328‑F of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section) is less than $2 million. (2) The following provisions apply as if you are a small business entity for the income year in which you are winding up the business: #### 328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you (1) For the purpose of working out whether you are a small business entity for the 2007‑08, 2008‑09, 2009‑10 or 2010‑11 income year (each a relevant income year) for the purposes of a provision to which subsection (3) applies: (2) An entity (the first entity) controls a discretionary trust for a relevant income year if, for any of the 4 income years (a previous income year) before that year: (a) if the previous income year is before the 2007‑08 income year—the trustee of the trust made a distribution of $100,000 or more to the first entity, any of its affiliates, or the first entity and any of its affiliates; or (i) the trustee of the trust paid to, or applied for the benefit of, the first entity, any of the first entity’s affiliates, or the first entity and any of its affiliates, any of the income or capital of the trust; and (ii) the percentage (the control percentage) of the income or capital paid or applied is at least 40% of the total amount of income or capital paid or applied by the trustee for that year. (1) This section sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (2) This section also sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (3) Any ordinary income that, apart from paragraph 328‑105(1)(a) of the Income Tax Assessment Act 1997 (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have derived before the changeover year (while you were using the STS accounting method) and you have not included in your assessable income because you have not received it is included in your assessable income for the changeover year. (4) Any general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, that, apart from paragraph 328‑105(1)(b) of that Act (as in force immediately before its repeal by Schedule 2 to the Tax Laws Amendment (2004 Measures No. 7) Act 2005), you would have incurred before the changeover year (while you were using the STS accounting method) and that you have not deducted because you have not paid them can be deducted for the changeover year. (b) for any later income year for which you are a small business entity but only if you used the STS accounting method for the income year before that later year. > Note: Example: You are a small business entity for the 2007‑08 and 2008‑09 income years and you continue to use the STS accounting method for those years. You are not a small business entity for the 2009‑10 income year so you cannot continue to use the STS accounting method for that year. Because you cannot use the STS accounting method for the 2009‑10 income year, you will not be able to use it again for a later income year even if you are a small business entity for that later year. In sections 328‑115 and 328‑120, STS accounting method means the accounting method that was required by the Income Tax Assessment Act 1997 to be used by STS taxpayers for the 2004‑05 income year. (b) you made a choice under subsection 328‑175(3) of old Subdivision 328‑D in relation to a depreciating asset you use to carry on a primary production business and for which you could deduct amounts under Subdivision 40‑F or 40‑G of the Income Tax Assessment Act 1997. (2) In determining whether you can choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997 in an increased access year, disregard subsection 328‑175(10) of that Act. (3) In applying paragraph 328‑175(10)(b) of that Act for the purpose of determining whether you can choose to use that Subdivision in any income year after the increased access years, disregard: (4) Paragraph 328‑180(1)(b) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that paragraph to $1,000: (i) first used the asset, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2015 budget time and before the 2019 application time; or (i) first used the asset, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 application time and before the 2019 budget time; or (i) first used the asset, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2019 budget time and before the 2020 announcement time; or (ii) first installed the asset ready for use, for a taxable purpose, on or after 1 July 2023 and on or before 30 June 2026. (a) a reference in that paragraph to the end of the income year in which you start to use the asset, or have it installed ready for use, for a taxable purpose were a reference to the earlier of: if: (i) first used the asset, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021; or (ii) first installed the asset ready for use, for a taxable purpose, at or after the 2020 announcement time and on or before 30 June 2021. (5) Paragraph 328‑180(2)(a) or (3)(a) of the Income Tax Assessment Act 1997 applies to an amount included in the second element of the cost of an asset as if a reference in that paragraph to $1,000: (5A) For the purposes of determining whether, under subsection 328‑180(2) of the Income Tax Assessment Act 1997, you can deduct, for an income year (the current year), the taxable purpose proportion of an amount included in the second element of the cost of an asset, disregard paragraph (b) of that subsection if: (2) For the purposes of determining whether subsection 328‑180(1) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (b) of that subsection (which sets a limit of $1,000 on the cost of the asset) if, in the period beginning at the 2020 budget time and ending on 30 June 2023, you: (3) For the purposes of determining whether subsection 328‑180(2) of the Income Tax Assessment Act 1997 allows you to deduct an amount in relation to a depreciating asset, disregard paragraph (a) of that subsection (which sets a limit of $1,000 on the amount) if the amount is included in the second element of the cost of the asset at any time in the period beginning at the 2020 budget time and ending on 30 June 2023. (4) In applying paragraph 328‑180(3)(a) of the Income Tax Assessment Act 1997 to an asset, disregard an amount included in the second element of the cost of the asset if the amount is deducted under subsection 328‑180(2) of that Act, as modified by subsection (3) of this section. (5) Section 328‑210 of the Income Tax Assessment Act 1997 applies as if the words “less than $1,000 but” in subsection (1) were disregarded, in relation to a deduction for an income year that ends: Subsection 328‑190(2) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that subsection to 15% were a reference to 57.5% if you are covered by section 40‑125 for the asset (which is about backing business investment). (1) A depreciating asset of yours that had been allocated to your general STS pool is treated as being allocated to your general small business pool. (2) A depreciating asset of yours that had been allocated to your long life STS pool is treated as being allocated to your long life small business pool. (3) If you made a choice, under subsection 328‑185(5) of old Subdivision 328‑D, not to have a depreciating asset allocated to your long life STS pool, the choice has effect for the purposes of subsection 328‑185(5) of new Subdivision 328‑D. (1) This section applies if a depreciating asset of yours is treated as being allocated to your general small business pool or long life small business pool under section 328‑185. (2) The opening pool balance of your general small business pool or long life small business pool for the 2007‑08 income year is taken to be the closing pool balance of your general STS pool or long life STS pool, as the case requires, for the 2006‑07 income year, reduced or increased by any adjustment required under section 328‑225 of new Subdivision 328‑D (about change in the business use of an asset). (a) you were not an STS taxpayer for the 2006‑07 income year (because you stopped being an STS taxpayer before that time); but (b) you are a small business entity for the 2007‑08 income year or a later income year and you choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets for that income year; the opening pool balance of your general small business pool or long life small business pool includes the sum of the taxable purpose proportions of the adjustable values of depreciating assets allocated to the pool under subsection 328‑185(3) of new Subdivision 328‑D for that year. (1) This section applies for the purposes of applying Subdivision 328‑D of the Income Tax Assessment Act 1997 for the 2012‑13 income year and later income years. (2) A depreciating asset that had been allocated to your long life small business pool is treated as being allocated to your general small business pool. (a) the closing pool balance of your general small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under section 328‑225 of that Act; and (b) the closing pool balance of your long life small business pool for the 2011‑12 income year, reduced or increased by any adjustment required under that section. (1) This section applies if you chose to stop being an STS taxpayer for the 2005‑06 income year or the 2006‑07 income year. (2) You cannot choose to use new Subdivision 328‑D to deduct amounts for your depreciating assets until at least 5 years after the income year for which you chose to stop being an STS taxpayer. > Note: Subdivision 328‑D of the Income Tax Assessment Act 1997 continues to apply to depreciating assets that have been allocated to your small business pools even if you are not a small business entity, or do not choose to use that Subdivision, for an income year: see section 328‑220 of that Subdivision. (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct 20% of particular expenditure for your 2023‑24 income year if: (a) you are a small business entity, or an entity covered by subsection (4), for the income year in which you incur the expenditure; and (c) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (d) you can deduct 100% of the expenditure under another provision of a taxation law (whether or not in, or wholly in, the income year in which the expenditure is incurred); and (i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑450 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (6) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (ii) if the provider is a registered body of a kind listed in paragraph (2)(b), (c) or (d)—the training is within the provider’s scope of registration for that kind of registered body; and (d) each enrolment, or arrangement, for the provision of the training is made or entered into at or after 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022; and > Note: Paragraphs (b) and (c) mean this section will not apply to expenditure for on‑the‑job training or training provided by you in house. (a) a registered higher education provider (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); (b) a NVR registered training organisation (within the meaning of the National Vocational Education and Training Regulator Act 2011); (c) a registered education and training organisation (within the meaning of the Education and Training Reform Act 2006 (Vic.)); (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (2) Subsection (1) does not apply if your 2022‑23 income year starts before 1 July 2022. Instead, you can deduct for your 2023‑24 income year an amount that is equal to the sum of: (a) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(1) applies; and (b) the lower of $20,000 and 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑460(2) applies. (3) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑460 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (4) Sections 8‑10 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (b) you incur the expenditure in the period starting at 7.30 pm, by legal time in the Australian Capital Territory, on 29 March 2022 and ending at the end of: (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (a) you are a small business entity, or an entity covered by subsection (3), for the income year in which you incur the expenditure; and (c) you can deduct the amount of the expenditure under a provision of a taxation law (other than section 328‑455 of this Act) whether or not in, or wholly in, the income year in which the expenditure was incurred; and (d) you incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations; and (f) if the expenditure is on a depreciating asset—the only balancing adjustment events that occur for the asset at a time during the period referred to in paragraph (b) when you hold the asset occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997; and (ii) the asset is not in‑house software allocated to a software development pool for the income year in which you incur the expenditure; (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (4) For the purposes of paragraphs (1)(c) and (2)(c), in working out whether you can deduct an amount of expenditure on a depreciating asset, assume that: (b) throughout that effective life, you will use the asset for a taxable purpose to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose. (a) 20% of the total amount (which may be nil) of your expenditure to which subsection 328‑470(1) or (3) applies in relation to the income year; and > Note: The deduction relates to the period of 1 July 2023 to 30 June 2024. An entity may have deducted an amount under paragraph (a) for a previous income year if the entity has a substituted accounting period. (2) The Income Tax Assessment Act 1997 has effect as if this section and section 328‑470 of this Act were provisions of Division 25 of the Income Tax Assessment Act 1997. (3) Sections 8‑10, 40‑215 and 355‑715 of the Income Tax Assessment Act 1997 do not apply in relation to a deduction under this section. (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (c) you start to use the asset, or have it installed ready for use, for any purpose after 30 June 2023 but before 1 July 2024; and (d) you start to use the asset, or have it installed ready for use, for a taxable purpose at a time (the start time) that is: (e) you are a small business entity, or an entity covered by subsection (4), for the income year that includes the start time; and (h) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) a new reasonably comparable depreciating asset that uses a fossil fuel (other than a use of which that is merely incidental) is available in the market at the start time; (ii) if the asset is being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than the other asset; (iii) if the asset is not being acquired by way of replacement of or substitution for another depreciating asset—the asset is more energy efficient than a new reasonably comparable depreciating asset that is available in the market at the start time; or (i) a depreciating asset (other than an asset excluded under subsection (6)) that uses electricity, or energy that is generated from a renewable source, to be more energy efficient; (iv) the use of electricity, or energy that is generated from a renewable source, by another depreciating asset to be monitored. (a) the amount is included in the second element of a depreciating asset’s cost under paragraph 40‑190(2)(a) of the Income Tax Assessment Act 1997; and (b) you can deduct the expenditure under a provision of a taxation law (other than section 328‑465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and (d) you are a small business entity, or an entity covered by subsection (4), for the income year in which the expenditure is incurred; and (i) if the asset could use a fossil fuel (other than a use of which that is merely incidental)—the asset to only use electricity, or energy that is generated from a renewable source; (ii) if the asset uses electricity, or energy that is generated from a renewable source—the asset to be more energy efficient; (g) the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40‑365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997. (i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and (ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection. (5) For the purposes of paragraph (1)(b) or (3)(b), in working out whether you can deduct an amount of expenditure assume that: (i) for the purposes of paragraph (1)(b)—to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose; or (ii) for the purposes of paragraph (3)(b)—to the same extent as you use it for a taxable purpose in the income year in which the expenditure is incurred. (b) expenditure (other than expenditure referred to in subparagraph (3)(e)(i)) on an asset that can use a fossil fuel (other than a use of which that is merely incidental); (c) an asset that solely or predominantly generates electricity from a renewable source (for example, photovoltaic cells) or expenditure on such an asset; (d) an asset, or expenditure, being capital works for which you can deduct an amount under Division 43 of the Income Tax Assessment Act 1997; > Note: Subsections (1) and (3) also do not apply to an item of trading stock because such an asset is not a depreciating asset: see section 40‑30 of the Income Tax Assessment Act 1997. A reference in each of the following provisions of the Income Tax Assessment Act 1997 to a registration under section 27A of the Industry Research and Development Act 1986 includes a reference to a registration under former section 39J of that Act: (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) the R&D entity cannot deduct an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from: (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D entity could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:22pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:22pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the R&D entity is taken to be able to deduct under subsection 355‑315(2) of the new Act that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D entity’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the R&D entity’s assessable income for the event year under subsection 355‑315(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 for the asset, the R&D entity is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑446 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the R&D entity is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑465 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: Section 355‑315 of the new Act would otherwise apply for the event in a case where the R&D entity had new law deductions. (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by an R&D partnership; and (i) the partner can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the partner chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset; and (d) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more R&D activities for the event year; and (i) the R&D partnership could deduct for the event year an amount under subsection 40‑285(2) of that Act for the asset and the balancing adjustment event; or (ii) an amount would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of that Act for the asset and the balancing adjustment event. > Note 1: This section applies even if the partner is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355‑310 of that Act, but with these changes to that section: <table cellspacing="0" cellpadding="0" style="width:365.25pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Changes to be made to section</span><span> </span><span>355</span><span>‑</span><span>310 of the new Act</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For a reference in section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">355</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">310 to...</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">substitute a reference to...</span></p></td></tr></thead><tbody><tr><td style="width:21.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:92.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>355</span><span>‑</span><span>315</span></p></td><td style="width:218.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>this section</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the purpose of conducting one or more of the R&amp;D activities to which the R&amp;D deductions (within the meaning of that section) relate</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>both:</span></p><p class="Tablea"><span>(a) the purpose of conducting one or more of the research and development activities (within the meaning of former section</span><span> </span><span>73B of the old Act) to which the old law deductions relate; and</span></p><p class="Tablea"><span>(b) the purpose of conducting one or more of the R&amp;D activities to which the new law deductions (if any) relate</span></p></td></tr><tr><td style="width:21.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:92.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D entity</span></p></td><td style="width:218.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>R&amp;D partnership</span></p></td></tr></tbody></table> ``` if Division 40 of that Act applied as described in subsection (2) of this section, the partner is taken to be able to deduct under subsection 355‑525(2) of the new Act the partner’s proportion of that amount for the event year. (4) If an amount (the section 40‑285 amount) would be included in the R&D partnership’s assessable income for the event year under subsection 40‑285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of: is taken to be included in the partner’s assessable income for the event year under subsection 355‑525(3) of the new Act:  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partner’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2). (4A) In applying Division 355 of the new Act in relation to the asset for the income year, if one or more partners (including the partner) in the R&D partnership is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset, the partner is taken to have: (a) if an amount is taken to be included in the R&D entity’s assessable income for the event year as mentioned in subsection (4) of this section—a clawback amount under section 355‑448 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or (b) if the partner is taken to be able to deduct an amount as mentioned in subsection (3) of this section—a catch up amount under section 355‑467 of the new Act for the income year equal to the amount of that deduction.  > adjusted section 40‑285 amount means so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s deductions under section 355‑520 of the new Act mentioned in subsection (4A) of this section. > total decline in value means the asset’s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section. (b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the partner for the event, do so apply to the partner for the event. > Note 1: Section 355‑525 of the new Act would otherwise apply for the event in a case where the partner had new law deductions. Item 7 of the table in subsection 57‑110(2) in Schedule 2D to the Income Tax Assessment Act 1936 applies as if the deduction rules set out in the final column of that item also included former sections 73BA and 73BH of the Income Tax Assessment Act 1936. For the purposes of step 1 of the method statement in subsection 355‑415(2) of the Income Tax Assessment Act 1997, also disregard amounts that have already been taken into account under former subsection 73B(14AA) of the Income Tax Assessment Act 1936 for the R&D entity, the grouped entity and the R&D activities for an earlier income year. (1) This section applies if, apart from former paragraph 73B(10)(a) of the Income Tax Assessment Act 1936, an eligible company could deduct advance R and D expenditure in one or more income years commencing on or after 1 July 2011. > Note: That deduction would be under former section 73B of that Act as that former section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (a) apart from Subdivision H (prepaid expenditure) of Division 3 of Part III of the Income Tax Assessment Act 1936, an eligible company can deduct an amount under former section 73B, 73BA, 73BH, 73QA, 73QB or 73Y of that Act for an income year commencing before 1 July 2011; and (c) apart from former paragraph 73B(10)(a) of that Act, the eligible company could deduct an amount, as a result of that application of that Subdivision, for an income year commencing on or after 1 July 2011. > Note: That deduction would be under that Act as it applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011. (3) Former paragraph 73B(10)(a) of that Act is taken to apply to those income years commencing on or after 1 July 2011 as if the reference in that former paragraph to section 39J of the Industry Research and Development Act 1986 were a reference to section 27A of that Act. (4) An expression used in this section that is also used in former section 73B of the Income Tax Assessment Act 1936 has the same meaning in this section as it has in that former section. This Subdivision applies to core technology (within the meaning of former section 73B of the Income Tax Assessment Act 1936) if: (a) you incurred core technology expenditure (within the meaning of that former section) in an income year commencing before 1 July 2011 in relation to the core technology under one or more contracts entered into at or after the time referred to in former subsection 73B(12) of that Act; and (b) that expenditure (the undeducted expenditure) cannot be deducted for the last income year commencing before 1 July 2011. (1) This section applies for the purposes of Division 40 of the Income Tax Assessment Act 1997, other than sections 40‑292 and 40‑293 of that Act, if the core technology (the asset) is a depreciating asset. (2) Disregard this section, including its effect on the amount you can deduct under section 40‑25 of that Act for the asset, for the purposes of working out: (3) The asset’s opening adjustable value for the first income year that commences on or after 1 July 2011 (the first new income year) is equal to the amount of the undeducted expenditure. (4) Subsection 40‑75(2) of the Income Tax Assessment Act 1997 applies to the asset as if the first new income year were a change year (within the meaning of that subsection). If the core technology is not a depreciating asset, you can deduct the undeducted expenditure in equal proportions over a period of 5 income years starting in the first income year commencing on or after 1 July 2011. To work out the film component (if any) of your tax loss for the 1997‑98 income year or a later income year, apply former section 375‑805 of the Income Tax Assessment Act 1997. If you incurred a film loss for the purposes of former section 79F (Film losses of 1989‑90 to 1996‑97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989‑90 to 1996‑97 income years, that film loss is the film component of your tax loss for that income year. (1) To work out your film loss (if any) for the purposes of the Income Tax Assessment Act 1997 for the 1989‑90 or a later income year, apply former section 375‑810 of that Act. (2) You can deduct in the 1997‑98 or a later income year your film loss for any of the 1989‑90 to 1996‑97 income years only to the extent that it has not already been deducted. (1) Division 392 of the Income Tax Assessment Act 1997 applies to assessments for the 1998‑99 income year and later income years. (a) it had applied to your assessment for each income year before the 1998‑99 income year for which Division 16 of Part III of the Income Tax Assessment Act 1936 applied in relation to your income; and (b) you had carried on a primary production business during each income year before the 1998‑99 income year when you carried on a business of primary production; and (c) for each income year before the 1998‑99 income year you had a basic taxable income equal to your taxable income for the income year for the purposes of Division 16 of Part III of the Income Tax Assessment Act 1936. > Note: Section 149A of the Income Tax Assessment Act 1936 identifies what your taxable income for an income year is for the purposes of Division 16 of Part III of that Act. Division 392 of the Income Tax Assessment Act 1997 does not apply to your assessment for the 1998‑99 income year or a later income year if you made an election under section 158A (Election that Division not apply) of the Income Tax Assessment Act 1936 relating to an income year before the 1998‑99 income year. 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 A reference in Division 393 of the Income Tax Assessment Act 1997 to a deduction under section 393‑5 of that Act for making a farm management deposit is taken to include a reference to a deduction under section 393‑10 in Schedule 2G to the Income Tax Assessment Act 1936, as in force just before the commencement of this section, if the deposit was made before the 2010‑11 income year. #### 393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 (b) the deposit was made with an FMD provider as a result of a request to which section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, applied; the unrecouped FMD deduction in respect of the deposit at that time is equal to the amount of the unrecouped deduction (within the meaning of the former subsection 159GA(3) of the Income Tax Assessment Act 1936) in respect of the deposit immediately before it ceased to be a deposit under the Loan (Income Equalization Deposits) Act 1976. > Note: This means that the unrecouped deduction relating to the deposit under the Loan (Income Equalization Deposits) Act 1976 continues to apply (by becoming an unrecouped FMD deduction) when the deposit is transferred to an FMD provider as a farm management deposit. The Loan (Income Equalization Deposits) Act 1976 was repealed on 22 February 2005. If a beneficiary of a trust was covered by paragraph (c) of the definition of primary producer in section 393‑25 in Schedule 2G to the Income Tax Assessment Act 1936 in the 2009‑10 income year, treat subsection 393‑25(3) of the Income Tax Assessment Act 1997 as having applied to the beneficiary for the purpose of determining the maximum number of choices that the trustee may make under subsection 393‑27(2) of that Act for the 2010‑11 income year. (a) a farm management deposit of an owner was unclaimed moneys for the purposes of section 69 of the Banking Act 1959; and (2) For the purpose of subsection 393‑10(1) of the Income Tax Assessment Act, treat the repaid unclaimed moneys as a repayment of the deposit of the owner. (3) To avoid doubt, the payment of unclaimed moneys to the Commonwealth under section 69 of the Banking Act 1959 is not a repayment of the deposit of the owner for the purposes of Division 393 of the Income Tax Assessment Act 1997. 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 #### 393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976 If a farm management deposit was made with an FMD provider as a result of a request under section 25B of the Loan (Income Equalization Deposits) Act 1976, as in force on 21 February 2005, then: (a) subsections 393‑40(1) to (4) of the Income Tax Assessment Act 1997 apply as if the day the deposit was made was the day on which the deposit was originally made under the Loan (Income Equalization Deposits) Act 1976; and (1) A copyright collecting society to which section 51‑43 of the Income Tax Assessment Act 1997 applies, may elect that, from 1 July 2004, the section apply to all ordinary income, and statutory income, collected or derived by the society on or after 1 July 2004. Division 420 of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division. Subdivision 615‑C of the Income Tax Assessment Act 1997 applies to you with the modifications set out in this Subdivision if you chose to obtain a roll‑over involving \*shares or units that: (b) were your trading stock, or revenue assets, at the time immediately before that disposal, redemption or cancellation. (1) Disregard subparagraph 615‑45(a)(ii), and paragraph 615‑45(b), of the Income Tax Assessment Act 1997 if the roll‑over relates to \*shares that were disposed of, redeemed or cancelled. (2) For each of the \*shares in the interposed company that you acquired in return for those of your shares or units in the original entity that were your \*trading stock at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  (2) For the purpose of calculating any profit or loss on a future disposal, cessation of ownership, or other realisation of a \*share in the interposed company that you acquired in return for those of your shares or units in the original entity that were \*revenue assets at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  Subdivision 620‑A of the Income Tax Assessment Act 1997 applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. (1) Part 3‑90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Act (No. 1) 2002 and amended by: (2) Section 713‑50 of the Income Tax Assessment Act 1997 (about factors to consider in determining destination of distribution by non‑fixed trust) applies for the purposes of this Part in the same way as it applies for the purposes of Part 3‑90 of that Act. ### Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly‑owned subsidiary of the entity (the future head company) that became the head company of the group; or (ii) at some time during that period, the entity was a wholly‑owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (ii) it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (1) If a group is a transitional group, its head company may, subject to subsection (3), choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (3) If the choice is to be made after the end of the period mentioned in paragraph (2)(a) and before the end of the day mentioned in paragraph (2)(b), it cannot be made unless each entity in relation to which the conditions in subsection (5) are satisfied has agreed to it being made. (a) the entity (the leaving entity) ceased to be a subsidiary member of the group before the choice was made (in a subsection (3) case) or before the revocation took place (in a subsection (4) case); and (b) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; and (c) the asset had become that of the head company because that section applied when a chosen transitional entity (whether or not the same entity as the leaving entity) became a subsidiary member. Section 716‑855 applies for the purposes of this Division in the same way as that section applies for the purposes of Part 3‑90 of the Income Tax Assessment Act 1997. is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705‑B of that Act and with this Division. 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity Section 701‑10 (cost to head company of assets of joining entity) and subsection 701‑35(4) (setting value of trading stock at tax‑neutral amount) of the Income Tax Assessment Act 1997 do not apply to the assets of a chosen transitional entity. > Note: The fact that the head company inherits the entity’s history under section 701‑5 of that Act when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time. #### 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities (2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non‑chosen subsidiary) is worked out in a special way. (b) for each sub‑group (see subsection (6)) that exists in relation to the non‑chosen subsidiary—the sub‑group’s notional allocable cost amount (see subsection(5)) for the non‑chosen subsidiary. (4) The head company adjusted allocable amount for the non‑chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if; (b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of head company’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub‑group in relation to the non‑chosen subsidiary. (5) For each sub‑group that exists in relation to the non‑chosen subsidiary, there is a sub‑group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non‑chosen subsidiary if: (a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non‑chosen subsidiary and the entities comprising the sub‑group; and (c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub‑group membership interests (see subsection (6)) in relation to the sub‑group, and any such entity held those membership interests during the period when it actually held them; and (d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of chosen transitional entity’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub‑group. (6) If a chosen transitional entity holds membership interests in a non‑chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non‑chosen subsidiary: (a) the chosen transitional entity and each interposed non‑chosen subsidiary comprise a sub‑group in relation to the non‑chosen subsidiary (unless the non‑chosen subsidiary is included in a sub‑group in relation to another non‑chosen subsidiary); and (i) the membership interests that the chosen transitional entity holds directly in the non‑chosen subsidiary or in any of the interposed non‑chosen subsidiaries; (ii) the membership interests that each interposed non‑chosen subsidiary holds directly in the non‑chosen subsidiary or in any of the other interposed non‑chosen subsidiaries. #### 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities If any provision of the Income Tax Assessment Act 1997 would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply. > Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred. (1) This section has effect for the purposes of applying section 705‑70 (step 2 of allocable cost amount) of the Income Tax Assessment Act 1997 in relation to a transitional entity. (2) In spite of subsection 705‑70(1A) of that Act, if the amount of an accounting liability of the transitional entity would be different when it becomes an accounting liability of the transitional group, that difference is not taken into account in working out the amount of the liability. #### 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different (a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset (the roll‑over asset) for which there was: (ii) roll‑over relief under section 40‑340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and (i) became an asset of the head company when the transitional group came into existence because subsection 701‑1(1) (the single entity rule) of that Act applies; or differs at that time from what it would have been if the act, transaction or event that gave rise to the CGT event had not occurred in relation to the roll‑over asset; then the provisions mentioned in subsection (2) apply as if the act, transaction or event had not occurred in relation to the roll‑over asset. (a) the act, transaction or event mentioned in subsection (1) happened before a demerger and in connection with the demerger; and (b) before the transitional group came into existence, at least one of the following entities ceased to be a member of the demerger group because of the demerger: (i) the originating company in relation to the roll‑over, or the transferor in relation to the roll‑over relief, was a foreign resident; and (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as a transitional foreign‑held subsidiary of the group. #### 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets (1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied. (2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset. (a) the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and (b) former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset. (4) The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group. (6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses. #### 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets (b) just before the transitional group came into existence, the entity that became the head company held a pre‑CGT asset; and (d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre‑CGT asset and is held by the head company only because the entity is taken by subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company. (2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence. #### 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity (1) This section provides for an addition to the step 1 amount for working out under section 711‑20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity) that ceases to be a subsidiary member of the transitional group at a time (the leaving time), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701‑1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount for paragraph</span><span> </span><span>(2)(c)</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">If, because of the circumstances described in paragraphs</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(a) and (b):</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">The amount is:</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:180.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following provisions applied to the entity:</span></p><p class="Tablea"><span>(a) former section</span><span> </span><span>61A of the </span><span style="font-style:italic">Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(b) former Subdivision</span><span> </span><span>57</span><span>‑</span><span>I in Schedule</span><span> </span><span>2D to the</span><span style="font-style:italic"> Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(c) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(4) of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td><td style="width:148.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the amount treated as being the cost of the asset under that provision; and</span></p><p class="Tablea"><span>(b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>2</span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following subsections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span><span> applied to the entity:</span></p><p class="Tablea"><span>(a) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(5);</span></p><p class="Tablea"><span>(b) 58</span><span>‑</span><span>70(3)</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The amount treated as being the cost, or the first element of the cost, of the asset under that subsection</span></p></td></tr></tbody></table> ``` (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997, as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="4" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amounts and provisions for different dates of acquisition</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Date of the acquisition</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Amount</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Provision of Division</span><span style="font-weight:bold"> </span><span style="font-weight:bold">58 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> applying to the acquisition and the working out of the amount</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:76.7pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>160</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>220</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>After 30</span><span> </span><span>June 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>First element of the cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subsection</span><span> </span><span>58</span><span>‑</span><span>70(5)</span></p></td></tr></tbody></table> ``` > Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. > Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and ### Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: #### 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70‑45 to 70‑70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420‑51 to 420‑58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (a) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority‑owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority‑owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority‑owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority‑owned entity became a subsidiary member of the group, there was roll‑over relief under section 40‑340 of the Income Tax Assessment Act 1997. (a) while the asset is, because subsection 701‑1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, its tax cost setting amount is taken to be equal to the continuing majority‑owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711‑30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997. (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset becomes that of an entity (a new asset holder) other than the head company because subsection 701‑1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder) acquiring some or all of the membership interests in the new asset holder; and (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset is acquired by another entity (a new asset holder) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll‑over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value asset just before the acquisition; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 #### 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 (b) members of the consolidated group or the MEC group mentioned in subsection 104‑500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701‑1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701‑1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (3) If this section applies, neither subsection 104‑500(4) nor subsection 104‑500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year. ### Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C‑B); and (b) modifies certain rules in Part 3‑90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C‑C). > Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719‑2 and 719‑10 of this Act). 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership #### 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(ii) of that Act (see subsection 719‑2(3) of this Act). (b) a trust (a non‑resident trust) that does not meet the requirements in any item of the table in section 703‑25 of the Income Tax Assessment Act 1997. (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non‑resident company or a non‑resident trust; or Test entity must be a subsidiary member on assumption that non‑resident companies and non‑resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non‑resident company or non‑resident trust were a subsidiary member of the group. (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv). #### 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(iii) of that Act (see subsection 719‑2(3) of this Act). (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C‑10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3). If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C‑10 are met; and (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (ii) an entity that is a transitional foreign‑held indirect subsidiary of the group because of another application of this paragraph; Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign‑held indirect subsidiary would need to have satisfied the set of requirements in either section 701C‑10 or 701C‑15 (1) This Subdivision applies if an entity (the transitional foreign‑held joining entity) that is a transitional foreign‑held subsidiary or a transitional foreign‑held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time) the group comes into existence. (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign‑held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign‑held indirect subsidiary that becomes a subsidiary member at that time takes account of this. (a) section 701‑10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); apply, for the purposes of setting the tax cost of an asset of the transitional foreign‑held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign‑held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. > Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign‑held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign‑held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign‑held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign‑held subsidiary and the other entity. > Note 2: If the transitional foreign‑held joining entity is a transitional foreign‑held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705‑A of the Income Tax Assessment Act 1997, in its application in accordance with Subdivision 705‑B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company. Subsection 701‑35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax‑neutral amount) does not apply to the assets of the transitional foreign‑held joining entity if it is a transitional foreign‑held subsidiary. Section 701‑15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: (a) this section applies to each membership interest in the transitional foreign‑held subsidiary that is held by an entity (an eligible non‑resident) of a kind mentioned in subparagraph 701C‑20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign‑held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701‑1(2) of the Income Tax Assessment Act 1997 applies to the eligible non‑resident in the same way as it applies to the head company. Section 711‑5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: > Note: If the leaving entity is a transitional foreign‑held subsidiary (within the meaning of section 701C‑20 of the Income Tax (Transitional Provisions) Act 1997), this Division will, in accordance with subsection 701‑15(4) of this Act (see section 701C‑40 of the first‑mentioned Act), apply to membership interests that an eligible non‑resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity. (1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707‑C of the Income Tax Assessment Act 1997. (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period. (1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if: (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (d) the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997. (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: (1) The head company of a consolidated group may make a choice in the approved form to apply section 701D‑10 to another entity. (2) However, the head company cannot make that choice if subsection 701D‑10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (a) an asset of the head company because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701‑55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40‑77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40‑77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40‑285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount. (b) after the asset became an asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). > Note: The final entity will be different from the head company if an entity (the leaving entity) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40‑285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. > Note: The final entity will be entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701‑5 (the entry history rule) of that Act and perhaps also section 701‑40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity) became a subsidiary member of the group; and It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). > Note: In some cases, section 705‑47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40‑285(3) of this Act. If: (b) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and subsection 40‑285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701‑10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997. > Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997. (1) For the purposes of Part 3‑90 of the Income Tax Assessment Act 1997, this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960‑G of that Act whether the interest or right is a membership interest of the entity in the other entity. > Note: Under Subdivision 960‑G of the Income Tax Assessment Act 1997, a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001) apply to transactions in relation to the interest or right at the relevant time. Despite the amendments of section 703‑35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) If an entity (the joining entity) to which section 40‑75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time), this Subdivision applies in relation to: (ii) became assets of the head company of the group at the joining time because of section 701‑1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure. (1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). (2) If the joining entity could not deduct an amount under Subdivision 40‑B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701‑55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40‑35, 40‑37, 40‑40 or 40‑43 treated the joining entity as holding a notional asset. > Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705‑30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. (a) deductions under former Subdivision 330‑A, 330‑C or 330‑H of the Income Tax Assessment Act 1997, or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated an entity as holding because of the expenditure. (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); > Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40‑75(4) of this Act, but may have been reset since under Subdivision 40‑B of the Income Tax Assessment Act 1997. > Note 2: The effective life of a notional asset is specified by whichever one of sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act is relevant to the notional asset. (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (9) Section 705‑55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705‑45 of that Act. > Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705‑40 of the Income Tax Assessment Act 1997. (a) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701‑5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. > Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705‑305(3). (ii) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707‑A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member. 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value #### 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707‑320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor) other than the real loss‑maker mentioned in subsection 707‑315(1) of that Act for the bundle; and (b) both the real loss‑maker and the value donor became members of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (ca) neither the real loss‑maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (ii) a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (ii) section 713‑540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (2) It must have been possible for the real loss‑maker to have transferred the loss to the value donor under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss‑maker at the initial transfer time the amount worked out using the formula:  > Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707‑327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss‑maker to the transferee. > total of real loss‑maker’s non‑foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss‑makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) included in a bundle of losses: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. #### 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value (1) This section affects the calculation of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707‑325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936, in the bundle). > Note: This section does not affect the calculation of the real loss‑maker’s modified market value for other purposes (such as the real loss‑maker being a value donor for the purposes of another application of section 707‑325 of this Act). (3) One condition is that the event was an injection of capital directly into the real loss‑maker by the value donor mentioned in section 707‑325 of this Act. (c) that would have caused subsection 707‑325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss‑maker’s modified market value (even if no other events described in subsection 707‑325(4) of that Act had occurred), apart from this section. (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss‑maker (whether or not the event also involved either the value donor or the real loss‑maker); or (1) This section has effect for the purposes of working out under Subdivision 707‑C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707‑325, as if there were added to the modified market value of the real loss‑maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (c) the loss is not a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707‑A of that Act at the initial transfer time had the company: > Note: This section has effect even if the amount added to the real loss‑maker’s modified market value under section 707‑325 is nil because the value donor’s modified market value is nil. (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707‑325, as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (4) If the transferee mentioned in subsection 707‑325(1) chooses, sections 707‑310, 707‑335 (except paragraph 707‑335(2)(a)) and 707‑340 of the Income Tax Assessment Act 1997 (and subsections 707‑315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: > Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707‑325(1)(d) and (e) and subsection 707‑325(2) in an application of section 707‑325 separate from the application of that section mentioned in paragraph (1)(a) of this section. > Note: This means that a loss that provided a basis for section 707‑325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. (b) in connection with the requirement that it must have been possible for a company (the notional transferor) to transfer to another company (the notional transferee) for an income year a loss under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997. (b) ends immediately after the initial transfer time mentioned in subsection 707‑320(1) of the Income Tax Assessment Act 1997. > Note: For the purposes of identifying the trial year using the definition in section 707‑120 of the Income Tax Assessment Act 1997, the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time. (1) Subsection (3) of this section affects the calculation, under section 707‑325 of the Income Tax Assessment Act 1997 and section 707‑325 of this Act, of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (the formation time) the group became a consolidated group; and (b) the provisions described in subsection 707‑327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707‑327(1)(b) and (c) of this Act as if the bundle included the loss; and (d) subsection 707‑325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707‑325(1) of this Act chooses that this section apply in relation to the real loss‑maker. (2) Section 707‑325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. (3) Disregard for the purposes of subsection 707‑325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707‑325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or > Note: Disregarding such an event could have a direct or indirect effect on the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss‑maker’s modified market value calculated under section 707‑325 of the Income Tax Assessment Act 1997, if the real loss‑maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707‑325 of this Act to add an amount to the real loss‑maker’s modified market value for those purposes. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) that: (b) was transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from an entity other than the real loss‑maker. (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997. Disregard an event that is described in subsection 707‑325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707‑325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004. (1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss‑maker) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time) the transferee became the head company of a consolidated group; and (ii) the conditions in one or more of paragraphs 165‑15(1)(a), (b) and (c) did not exist in relation to the real loss‑maker; and (da) the real loss‑maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non‑transferred losses) of the same sort that the transferee made without a transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non‑transferred losses). (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. <table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Limit on utilising the losses</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For this income year:</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the losses that the transferee may utilise cannot exceed:</span></p></td></tr></thead><tbody><tr><td style="width:20.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:120.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The first income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span style="font-size:8pt; vertical-align:2pt">1</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The second income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) </span><span style="font-size:8pt; vertical-align:2pt">2</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the amount of the losses utilised for the income year mentioned in item</span><span> </span><span>1</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The third income year ending after the initial transfer time, or a later income year</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time</span></p></td></tr></tbody></table> ``` (4) Subdivision 707‑C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707‑A of that Act. > Note: This has 2 effects. First, Subdivision 707‑C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707‑A of that Act). (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). (7) This section does not limit the transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company. In working out when a choice may be made under subsection 707‑325(5), 707‑327(5), 707‑328A(4) or 707‑350(5), ignore losses to which section 713‑535 of the Income Tax Assessment Act 1997 applies. > Note: That section deals with losses transferred under Subdivision 707‑A of that Act from certain wholly‑owned subsidiaries of life insurance companies that are members of a consolidated group. Section 707‑405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act. (1) This section reduces the adjustable value of a notional asset that section 40‑35, 40‑37, 40‑38, 40‑40 or 40‑43 treats the head company of a consolidated group as holding, if: (b) that section treats the leaving entity as holding a notional asset because of section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997. > Note: Section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time. The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences. (1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event) happening involving an entity (the originating entity) and another entity (the recipient entity) if: (a) the event occurs in connection with a life insurance company (the member life insurance company) becoming a member of a consolidated group; and (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest) in a company or in another trust. (a) a life insurance company transfers an asset (also the original asset) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320‑200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset) to its segregated exempt assets where, apart from this Subdivision, section 320‑255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event) is made in connection with the life insurance company (also the member life insurance company) becoming a member of a consolidated group. (1) This Subdivision applies only if the originating entity (for a section 713‑505 case) or the life insurance company (for a section 713‑510 case) chooses that it apply. (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713‑510 of the Income Tax Assessment Act 1997; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713‑510 of the Income Tax Assessment Act 1997; and (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs. This Act, and the Income Tax Assessment Act 1997, apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group. (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain) that the originating entity would have made as a result of the deferral event is disregarded; and (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount) under paragraph 320‑15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (1) This section operates if, after the deferral event happens, another event (the new event) happens where the new event is: (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (i) the original asset being transferred to or from the company’s virtual PST under section 320‑180, 320‑185 or 320‑195 of the Income Tax Assessment Act 1997; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320‑235, 320‑240 or 320‑250 of that Act; or (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. > Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713‑505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (1) For a section 713‑505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713‑535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: (a) an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group at a time (the leaving time); and (b) but for the cessation of membership and section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision. Sections 716‑340 and 716‑345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. <table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:345.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Extended operation of sections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 1</span><br><span style="font-weight:bold">Sections</span><span style="font-weight:bold"> </span><span style="font-weight:bold">716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">340 and 716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">345 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> operate in relation to:</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 2</span><br><span style="font-weight:bold">In the same way as they operate in relation to:</span></p></td></tr></thead><tbody><tr><td style="width:5.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:161.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>46</span><span>‑</span><span>90 of that Act</span></p></td><td style="width:156.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>40</span><span>‑</span><span>455 of that Act</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software pool created under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure allocated to a software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Software, expenditure on which was in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>In</span><span>‑</span><span>house software, expenditure on the development of which is allocated to a software development pool</span></p></td></tr></tbody></table> ``` (1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: Section 703‑30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004. (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time) a wholly‑owned subsidiary of the entity that became the head company of the group (the head entity), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier‑1 company of the group at the formation time. Despite the amendment of section 719‑30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) Section 719‑160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719‑160(3) of the Income Tax Assessment Act 1997. (3) However, that effect of section 719‑160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division. (2) Paragraphs 701‑1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier‑1 company at the time the MEC group came into existence. (a) the entity and one or more other entities were members of a potential MEC group as eligible tier‑1 companies, throughout the period: (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier‑1 company, at the time the transitional group came into existence. To avoid doubt, sections 707‑325 and 707‑327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719‑305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707‑A of that Act. Subsection 719‑325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006. (1) A reference in an agreement to item 25 of the table in subsection 721‑10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: (1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: Division 725 applies to a scheme entered into on or after 1 July 2002. It also applies to a scheme entered into on or after 27 June 2002, but only if: ### Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (1) Division 727, as inserted by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 and amended by the New Business Tax System (Consolidation and Other Measures) Act 2003, applies to a scheme entered into on or after 1 July 2002. (b) a presumed indirect value shift that happens under the scheme and affects a realisation event that happens on or after 1 July 2002. (a) the economic benefits taken into account in determining that the scheme has resulted in that indirect value shift or presumed indirect value shift include economic benefits provided by: > Note: In that case, the consequences of the trigger event are worked out under Division 138 or 139 of the Income Tax Assessment Act 1997: see items 13 and 14 of Schedule 15 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002. (1) An indirect value shift does not have consequences under Division 727 of the Income Tax Assessment Act 1997 if, to the extent of at least 95% of their total market value, the greater benefits consist entirely of: (a) a right to have services that are covered by section 727‑240 of that Act provided directly by the losing entity to the gaining entity; or (d) if the losing entity’s 2002‑2003 income year ends before 30 June 2003—the start of the losing entity’s 2004‑2005 income year. (2) For the purposes of section 727‑850 (about a presumed indirect value shift affecting a realisation event) of the Income Tax Assessment Act 1997, subsection (1) of this section applies to the presumed indirect value shift: #### 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (2) Paragraph 727‑470(2)(a) of the Income Tax Assessment Act 1997 (as in force immediately before the commencement of this section) continues to have effect in relation to the indirect value shift as if the repeals and amendments made by Schedule 1, Parts 1 and 2 of Schedule 3 and Schedule 8 to the Tax Laws Amendment (Small Business) Act 2007 had not been made. ## Division 723 Direct value shifting by creating right over non‑depreciating asset ## 723‑1 Application of Division 723 723‑1 Application of Division 723 (1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: ## Division 725 Direct value shifting affecting interests in companies and trusts ## 725‑1 Application of Division 725 725‑1 Application of Division 725 Division 725 applies to a scheme entered into on or after 1 July 2002. It also applies to a scheme entered into on or after 27 June 2002, but only if: ## Division 727 Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings ### Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer ## 727‑1 Application of Division 727 727‑1 Application of Division 727 (1) Division 727, as inserted by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 and amended by the New Business Tax System (Consolidation and Other Measures) Act 2003, applies to a scheme entered into on or after 1 July 2002. (b) a presumed indirect value shift that happens under the scheme and affects a realisation event that happens on or after 1 July 2002. (a) the economic benefits taken into account in determining that the scheme has resulted in that indirect value shift or presumed indirect value shift include economic benefits provided by: > Note: In that case, the consequences of the trigger event are worked out under Division 138 or 139 of the Income Tax Assessment Act 1997: see items 13 and 14 of Schedule 15 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002. ## 727‑230 Transitional exclusion for certa 727‑230 Transitional exclusion for certain indirect value shifts relating mainly to services (1) An indirect value shift does not have consequences under Division 727 of the Income Tax Assessment Act 1997 if, to the extent of at least 95% of their total market value, the greater benefits consist entirely of: (a) a right to have services that are covered by section 727‑240 of that Act provided directly by the losing entity to the gaining entity; or (d) if the losing entity’s 2002‑2003 income year ends before 30 June 2003—the start of the losing entity’s 2004‑2005 income year. (2) For the purposes of section 727‑850 (about a presumed indirect value shift affecting a realisation event) of the Income Tax Assessment Act 1997, subsection (1) of this section applies to the presumed indirect value shift: ## 727‑470 Affected interests do not includ 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer #### 727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer (2) Paragraph 727‑470(2)(a) of the Income Tax Assessment Act 1997 (as in force immediately before the commencement of this section) continues to have effect in relation to the indirect value shift as if the repeals and amendments made by Schedule 1, Parts 1 and 2 of Schedule 3 and Schedule 8 to the Tax Laws Amendment (Small Business) Act 2007 had not been made. ## Part 4 ‑5—General Despite section 815‑20 of the Income Tax Assessment Act 1997, the documents covered by that section for an income year that starts before 1 July 2012 are taken to be as follows: (a) the Model Tax Convention on Income and on Capital, and its Commentaries, as adopted by the Council of the Organisation for Economic Cooperation and Development and last amended before the start of the income year; (b) the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, as approved by that Council and last amended before the start of the income year. (a) a determination under subsection 815‑30(1) of the Income Tax Assessment Act 1997 has effect in relation to an entity in an income year; and (2) Subdivision 284‑C in Schedule 1 to the Taxation Administration Act 1953 applies in relation to the entity and the income year as if: (b) each other provision of a taxation law applied in relation to the entity in the way it would have if that Subdivision had not been enacted. (a) in respect of tax other than withholding tax—in relation to income years starting on or after the date mentioned in subsection (2); and (b) in respect of withholding tax—in relation to income derived, or taken to be derived, in income years starting on or after that date. (b) the day the Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Act 2013 receives the Royal Assent. (1) Subject to this section, Division 820 of the Income Tax Assessment Act 1997 applies in relation to an income year that begins on or after 1 July 2001. (2) Subdivision 820‑L of that Act, to the extent that it relates to the requirements under section 820‑960 of that Act, applies only in relation to an income year that begins on or after 1 July 2002. #### 820‑12 Application of Division 974 of the Income Tax Assessment Act 1997 for the purposes of Division 820 of that Act (1) Division 974 of the Income Tax Assessment Act 1997 applies for the purposes of determining whether, for the purposes of Division 820 of that Act, an interest is a debt interest or an equity interest at any time on or after 1 July 2001 (whether or not the debt and equity test amendments apply to transactions in relation to that interest at that time). (2) In this section, debt and equity test amendments has the same meaning as in Part 4 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001. (2) Subject to subsection (3), the entity may choose, for any or all of those income years, to use the accounting standards in force under the Corporations Act 2001 immediately before 1 January 2005 (rather than the current accounting standards) for the purpose of calculating amounts applicable to the entity under Division 820 of the Income Tax Assessment Act 1997. > Note 1: Making the choice for an income year does not require the entity to maintain a full set of accounts based on those old accounting standards. (3) If the entity makes a choice under subsection (2) for an income year but an associate entity of that entity does not, the entity may, in working out its associate entity excess amount so far as it relates to that associate entity at a time in that year, use either the accounting standards in force under the Corporations Act 2001 immediately before 1 January 2005 or the current accounting standards. (4) If an ADI makes a choice under subsection (2) for an income year, the ADI must also choose to use for that year the prudential standards in force under the Banking Act 1959 immediately before 1 January 2005 (rather than the current prudential standards) for the purpose of calculating amounts applicable to the ADI under Division 820 of the Income Tax Assessment Act 1997. > Note 1: Making the choice for an income year does not require the entity to maintain capital adequacy calculations based on those old prudential standards. (5) For an income year for which an entity does not make a choice under subsection (2), the current accounting standards will be used for the purpose of calculating amounts applicable to the entity under Division 820 of the Income Tax Assessment Act 1997. (6) For an income year for which an ADI does not make a choice under subsection (2), the current prudential standards will be used for the purpose of calculating amounts applicable to the ADI under Division 820 of the Income Tax Assessment Act 1997. (1) Division 830 of the Income Tax Assessment Act 1997 applies to assessments for the 2003‑2004 income year, and each later income year, of a taxpayer who will as a result be a partner in an entity that is a foreign hybrid in relation to that income year. (2) Division 830 of the Income Tax Assessment Act 1997 applies for the purpose of working out the attributable income, in relation to an attributable taxpayer, for: (a) the statutory accounting period that starts on 1 July 2003 or on the day on which, as a result of an election under subsection 319(2) of the Income Tax Assessment Act 1936, the statutory accounting period that would otherwise start on 1 July 2003 starts; and (c) will as a result be a partner in an entity that is a foreign hybrid in relation to that statutory accounting period; or (d) has, directly or indirectly through one or more other entities, an interest in another entity that will, as a result, be a foreign hybrid in relation to that statutory accounting period. (i) a statutory accounting period of a CFC, in relation to which the taxpayer was an attributable taxpayer at the end of that period and had an attribution percentage greater than nil, ended in the past income year; or then, for the purposes mentioned in subsection (2) of this section, the Income Tax Assessment Act 1936 applies with the modifications set out in section 830‑20 of this Act in working out: (a) any amendment of an assessment of the taxpayer for the past income year made before the commencement of this section; and (b) the making of an assessment of the taxpayer for the past income year between the commencement of this section and the end of 30 June 2004; and (d) the making of any assessment of the taxpayer for the past income year that takes place after 30 June 2004 and before the end of the time within which, if that assessment had been made on 1 July 2004, the Commissioner could amend the assessment under paragraph 170(2)(b), (c) or (d) of the Income Tax Assessment Act 1936 (as in force before the day on which the Tax Laws Amendment (Improvements to Self Assessment) Act (No. 2) 2005 received the Royal Assent); and (a) apart from this subsection, subsection (1) would apply to a taxpayer in relation to a CFC for a past income year; and (c) the taxpayer prepared the income tax return on the basis that, for the purposes of Part X of the Income Tax Assessment Act 1936, the CFC was a resident of no particular unlisted country; (d) if there is only one past income year to which paragraphs (a) to (c) of this subsection apply—the taxpayer elects that the subsection applies for the past income year; or (e) if there is more than one past income year to which paragraphs (a) to (c) of this subsection apply—the taxpayer elects that the subsection applies for all of those past income years. (1) This section sets out the modifications of the Income Tax Assessment Act 1936 that, if section 830‑15 of this Act so provides, apply in working out for a taxpayer: (2) If the CFC is not a resident of a particular listed country or a particular unlisted country for the purposes of Part X of the Income Tax Assessment Act 1936 (including after applying section 331 of that Act), then for the purposes of that Part, the CFC is taken to be a resident of the country under whose laws it was formed. (3) For the purpose of subsection 393(1) of the Income Tax Assessment Act 1936, if the taxpayer paid foreign tax (within the meaning of that Act) (the actual foreign tax) on its interest in an amount included in the notional assessable income of the CFC for the statutory accounting period, then the CFC is taken to have paid foreign tax (within the meaning of that Act) in respect of the amount equal to the actual foreign tax divided by the taxpayer’s direct attribution interest in the CFC at the end of the statutory accounting period. (a) on the assumption in paragraph 830‑15(1)(c) of this Act, another CFC (the tracing CFC) would have been a partner in the foreign entity that the CFC mentioned in subsection (1) of this section (the foreign hybrid CFC) would have been; and (b) the taxpayer had an attribution tracing interest in the tracing CFC that was taken into account in calculating the taxpayer’s attribution percentage for the foreign hybrid CFC at the end of the statutory accounting period; and (c) the tracing CFC paid foreign tax (within the meaning of that Act) (the actual foreign tax) on its interest in an amount included in the notional assessable income of the foreign hybrid CFC for the statutory accounting period; then the foreign hybrid CFC is taken to have paid foreign tax, (within the meaning of that Act) in respect of the amount included in its notional assessable income, equal to the actual foreign tax divided by the tracing CFC’s direct attribution interest in the foreign hybrid CFC at the end of the statutory accounting period. (5) For the purpose of section 573 of the Income Tax Assessment Act 1936, if the taxpayer paid foreign tax (within the meaning of that Act) (the actual foreign tax) on its interest in an amount included in the notional income of the FIF for the notional accounting period, then the FIF is taken to have paid foreign tax (within the meaning of that Act) in respect of that amount equal to the actual foreign tax divided by the attribution percentage applicable under section 581 of that Act to the taxpayer in respect of the taxpayer’s interests in the FIF at the end of the notional accounting period. (1) The Subdivisions of Division 832 of the Income Tax Assessment Act 1997 covered by subsection (2) apply to assessments for income years starting on or after 1 January 2019. (1) Subdivision 832‑H (Imported hybrid mismatch) of the Income Tax Assessment Act 1997 applies to assessments for income years starting on or after 1 January 2019. (2) However, in applying Subdivision 832‑H to assessments for income years starting before 1 January 2020, items 2 and 3 of the table in subsection 832‑615(2) are to be disregarded. (3) Despite subsection (1), Subdivision 832‑H does not apply in relation to an offshore hybrid mismatch unless a deduction component of the mismatch arose in a foreign tax period that ends in an income year starting on or after 1 January 2019. (4) In determining whether subsection (3) is satisfied in relation to an offshore hybrid mismatch, disregard section 832‑635 of the Income Tax Assessment Act 1997. (1) This section has effect for amounts represented by or reasonably attributable to fund payments made in relation to the first income year starting on or after the first 1 July after the day on which the Tax Laws Amendment (Election Commitments No. 1) Act 2008 receives the Royal Assent by a trust that is a managed investment trust in relation to that year. (2) If you are a resident of an information exchange country, subsection 840‑805(1) of the Income Tax Assessment Act 1997 does not apply to the amounts to the extent that it would otherwise apply to you. (b) if there are no taxation laws of that country applicable to the entity or the entity’s residency status cannot be determined under those laws: (ii) for another entity—the entity is incorporated or formed in that country and is carrying on a business in that country. (4) Instead, you are liable to pay income tax on the amounts (reduced as mentioned in subsection (5)) at the rate declared by the Parliament. (a) if subsection 840‑805(2) or (3) of the Income Tax Assessment Act 1997 would apply to you apart from section 840‑805 of this Act—the end of the month in which the relevant amount is paid, applied or dealt with; or (b) if subsection 840‑805(4) of that Act would so apply to you—the end of the month in which you become presently entitled to the relevant amount. (b) if an entity chooses to apply the new Subdivision 842‑I in relation to the 2011‑12, 2012‑13, 2013‑14 and 2014‑15 income years—those income years. > new Subdivision 842‑I means Subdivision 842‑I (Investment Manager Regime) of the Income Tax Assessment Act 1997, as substituted by Schedule 7 to the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015. > Note: The new Subdivision 842‑I replaced a previous version of that Subdivision, which applied in relation to assessments for the 2010‑11 income year and later income years (see item 17 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012). (b) Subdivision 842‑I (Investment Manager Regime) of the Income Tax Assessment Act 1997, as substituted by Schedule 7 to the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 (the new IMR Schedule). (a) it is an IMR entity (within the meaning given by section 842‑220 of the Income Tax Assessment Act 1997, as inserted by the new IMR Schedule); and (b) subject to subsection (3) of this section, it is an IMR widely held entity (within the meaning given by sections 842‑230 and 842‑240 of the Income Tax Assessment Act 1997, as inserted by the new IMR Schedule); and (3) Treat subsection 842‑230(1) of the Income Tax Assessment Act 1997, as inserted by the new IMR Schedule, as not applying to the entity. If an IMR entity makes a choice under paragraph 842‑208(2)(c), section 94T of the Income Tax Assessment Act 1936 as amended by Schedule 7 to the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015, applies to the entity in relation to the income years in relation to which this Subdivision applies to the entity. (1) The object of this section is to disregard, for the purpose of calculating the assessable income of a corporate tax entity that is an IMR foreign fund, certain gains and losses that arise in the 2010‑11 income year, or an earlier income year, in respect of certain kinds of financial arrangements. (b) the corporate tax entity has pre‑2012 IMR income, a pre‑2012 IMR deduction, a pre‑2012 IMR capital gain or a pre‑2012 IMR capital loss in relation to the income year; and (c) the corporate tax entity has not lodged an income tax return in relation to the 2010‑11 income year, or any earlier income year, before the day that item 1 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012 commences; and (d) the Commissioner did not, before 18 December 2010, make an assessment of the taxable income of the corporate tax entity for any income year. > Note 1: For the purposes of this Act, pre‑2012 IMR income is defined in subsections 842‑270(1) and (2) of the Income Tax Assessment Act 1997 and pre‑2012 IMR capital gain is defined in subsection 842‑270(3) of that Act. > Note 2: Pre‑2012 IMR deduction is defined in subsections 842‑230(1) and (2) of this Act and pre‑2012 IMR capital loss is defined in section 842‑235 of this Act. (4) Subsection (3) does not apply if the Commissioner has reason to believe that there has been fraud by the corporate tax entity in relation to any income year. (5) Subsection (3) does not apply if before 18 December 2010 the Commissioner notified the corporate tax entity that an audit or compliance review would be undertaken in relation to any income year. (a) a foreign resident beneficiary of an IMR foreign fund in relation to the 2010‑11 income year or an earlier income year is not subject to Australian income tax in respect of pre‑2012 IMR income or a pre‑2012 IMR capital gain of the fund (or in respect of an amount that is referable to pre‑2012 IMR income or a pre‑2012 IMR capital gain of the fund) for the income year; and (b) the foreign resident beneficiary of the fund is not able to claim a deduction or utilise a tax loss in relation to the income year to the extent that the deduction or tax loss was incurred or made in respect of an amount that is: (c) this section does not provide any tax concession to an Australian resident that invests in the fund (whether directly or indirectly through one or more interposed entities). (2) This section applies to a beneficiary of a trust in relation to the 2010‑11 income year, or an earlier income year, if: (b) the beneficiary is not a trust or partnership at any time during the income year (other than a foreign superannuation fund); and (c) neither the trust nor the beneficiary has lodged an income tax return in relation to the 2010‑11 income year, or any earlier income year, before the day that item 1 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012 commences; and > Note: A trust that is an IMR foreign fund is generally subject to the general tax rules that apply to trusts, subject to the modifications in this Subdivision: see Division 6 of Part III of the Income Tax Assessment Act 1936. Also see section 842‑225 of this Act, which deals with trustees of IMR foreign funds. (a) for the purposes of applying Division 6 of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in that Division to share of the net income with references to share of the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (b) for the purposes of applying subsections 98A(1) and (3) of Division 6 of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in those subsections to individual interest of the beneficiary in the net income with references to individual interest of the beneficiary in the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (c) for the purposes of applying Division 6E of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in that Division to Division 6E net income with references to pre‑2012 non‑IMR Division 6E net income (within the meaning of subsection 842‑240(2) of the Income Tax (Transitional Provisions) Act 1997); and (d) in applying subsection 115‑215(3) of the Income Tax Assessment Act 1997 to the beneficiary, replace the reference in that subsection to each capital gain of the trust estate with a reference to each capital gain of the trust estate that is a pre‑2012 non‑IMR net capital gain (or is referable to a pre‑2012 non‑IMR net capital gain of the trust estate) (within the meaning of subsection 842‑240(3) of the Income Tax (Transitional Provisions) Act 1997); and (i) replace references in that section to net income of the trust estate with references to pre‑2012 non‑IMR net income of the trust estate (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (ii) replace the reference in that section to net capital gain (if any) with a reference to pre‑2012 non‑IMR net capital gain (if any) (within the meaning of subsection 842‑240(3) of the Income Tax (Transitional Provisions) Act 1997). (4) For the purposes of applying paragraph 115‑225(1)(a) of the Income Tax Assessment Act 1997 to the beneficiary in respect of the income year: (a) disregard a capital gain of the trust to the extent the capital gain is a pre‑2012 IMR capital gain (or is referable to a pre‑2012 IMR capital gain of the fund); and (b) disregard a pre‑2012 IMR capital loss of the trust for the purposes of determining the amount of the capital gain remaining after applying steps 1 to 4 of the method statement in subsection 102‑5(1) of that Act; and (c) disregard a net capital loss of the trust to the extent that it is attributable to a pre‑2012 IMR capital loss for the purposes of determining the amount of the capital gain remaining after applying steps 1 to 4 of the method statement in subsection 102‑5(1). (5) Subsections (3) and (4) do not apply if the Commissioner has reason to believe that there has been fraud by the trust in relation to any income year. (6) Subsections (3) and (4) do not apply if before 18 December 2010 the Commissioner notified the trust that an audit or compliance review would be undertaken in relation to any income year. (a) a foreign resident partner of an IMR foreign fund in relation to the 2010‑11 income year, or an earlier income year, is not subject to any Australian income tax in respect of pre‑2012 IMR income or a pre‑2012 IMR capital gain (or in respect of an amount that is referable to pre‑2012 IMR income or a pre‑2012 IMR capital gain) for the income year; and (b) the foreign resident partner of the fund is not able to claim a deduction or utilise a tax loss in relation to the income year to the extent that the deduction or tax loss was incurred or made in respect of an amount that is: (c) this section does not provide any tax concession to an Australian resident that invests in the fund (whether directly or indirectly through one or more interposed entities). (2) This section applies to a partner in a partnership in relation to the 2010‑11 income year, or an earlier income year, if: (b) the partner is not a trust or a partnership at any time during the income year (other than a foreign superannuation fund); and (c) neither the partnership nor the partner has lodged an income tax return in relation to the 2010‑11 income year, or any earlier income year, before the day that item 1 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012 commences; and (d) the Commissioner did not, before 18 December 2010, make an assessment of the taxable income of the partner for any income year. > Note: A partnership that is an IMR foreign fund is generally subject to the general tax rules that apply to partnerships, subject to the modifications set out in this Subdivision: see Division 5 of Part III of the Income Tax Assessment Act 1936. (a) for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references in that Division to the individual interest of the partner in the net income of the partnership with references to the individual interest of the partner in the pre‑2012 non‑IMR partnership net income (within the meaning of section 842‑245 of the Income Tax (Transitional Provisions) Act 1997); and (b) for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references in that Division to the individual interest of the partner in the partnership loss with references to the individual interest of the partner in the pre‑2012 non‑IMR partnership loss (within the meaning of section 842‑245 of the Income Tax (Transitional Provisions) Act 1997); and (c) disregard the partner’s pre‑2012 IMR capital gain or an amount that is referable to a pre‑2012 IMR capital gain (within the meaning of subsection 842‑270(3) of the Income Tax Assessment Act 1997) or pre‑2012 IMR capital loss or an amount that is referable to a pre‑2012 IMR capital loss (within the meaning of that term in section 842‑235 of this Act). (4) Subsection (3) does not apply if the Commissioner has reason to believe that there has been fraud by the partnership in relation to any income year. (5) Subsection (3) does not apply if before 18 December 2010 the Commissioner notified the partnership that an audit or compliance review would be undertaken in relation to any income year. (1) The object of this section is to ensure that the following provisions interact appropriately with the tax concessions mentioned in subsection 842‑210(1), paragraphs 842‑215(1)(a) and (b) and paragraphs 842‑220(1)(a) and (b) in respect of the 2010‑11 income year or an earlier income year: > Note: Division 6 of Part III of the Income Tax Assessment Act 1936, Division 115 of the Income Tax Assessment Act 1997, and all other provisions of those Acts apply to the trustee of an IMR foreign fund, subject to the modifications in this section. (2) This section applies to the 2010‑11 income year or an earlier income year of a trustee of a trust that is an IMR foreign fund in relation to that income year. (a) disregard a capital gain of the IMR foreign fund to the extent that the capital gain is a pre‑2012 IMR capital gain; and (b) disregard a pre‑2012 IMR capital loss of the IMR foreign fund for the purposes of determining the amount of the capital gain remaining after applying steps 1 to 4 of the method statement in subsection 102‑5(1); and (c) disregard a net capital loss of the IMR foreign fund to the extent that it is attributable to a pre‑2012 IMR capital loss for the purposes of determining how much of a capital gain that is not a pre‑2012 IMR capital gain remains after applying steps 1 to 4 of the method statement in subsection 102‑5(1). > Note: The effect of this subsection is that the increase to the assessable amount which occurs as a result of section 115‑220 of the Income Tax Assessment Act 1997 is calculated with reference to the capital gains of the IMR foreign fund that are not IMR capital gains or amounts referable to IMR capital gains (rather than by calculating the increase with reference to all capital gains of the fund). (4) For the purposes of applying section 115‑225 of the Income Tax Assessment Act 1997 in respect of section 115‑220, make the following assumptions: (a) replace the references in section 115‑225 to the net income of the trust estate with references to the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997) of the trust estate; (b) replace the references in section 115‑225 to net capital gain (if any) with a reference to pre‑2012 non‑IMR net capital gain (if any) (within the meaning of subsection 842‑240(3) of the Income Tax (Transitional Provisions) Act 1997). (5) For the purposes of applying section 98 of the Income Tax Assessment Act 1936 in respect of an income year that is the 2010‑11 income year or an earlier income year, replace references in that section to net income with references to pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997). > Note: The effect of this subsection is that where section 98 of the Income Tax Assessment Act 1936 applies to the trustee of a trust that is an IMR foreign fund, the trustee is only assessed and made liable to pay tax in respect of pre‑2012 non‑IMR net income of the fund (rather than in respect of all net income of the fund to which section 98 would otherwise apply). (6) For the purposes of applying section 99E of the Income Tax Assessment Act 1936 in respect of an income year that is the 2010‑11 income year or an earlier income year: (a) replace the reference to so much of the net income with a reference to so much of the net income or pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997) as the case may be; and (b) replace the reference to a part of the net income of another trust estate with a reference to a part of the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997) of another trust estate. > Note: The effect of this subsection is that the trustee of a trust that receives a distribution of pre‑2012 non‑IMR net income from another trust is not required to apply section 98, 99 or 99A of the Income Tax Assessment Act 1936 to those amounts. (7) The IMR foreign fund cannot utilise a tax loss or net capital loss in relation to the income year, or in any future income year, to the extent the loss is attributable to pre‑2012 IMR income, a pre‑2012 IMR capital gain, a pre‑2012 IMR deduction or a pre‑2012 IMR capital loss. (1) The pre‑2012 IMR deduction of an IMR foreign fund for an income year is the amount of the fund’s deductions for the income year to the extent to which they: The pre‑2012 IMR capital loss of an IMR foreign fund for an income year is the sum of the fund’s capital losses made in the income year that are attributable to CGT assets that are financial arrangements covered by section 842‑245 of the Income Tax Assessment Act 1997. (1) A trust’s pre‑2012 non‑IMR net income in relation to an income year is determined by calculating the net income of the trust as follows: (a) for income years prior to the 2010‑11 income year—disregard the pre‑2012 IMR capital gain and pre‑2012 IMR capital loss; (c) disregard any amount that is included in the trust’s assessable income under subsection 207‑35(1) to the extent that the amount is attributable to pre‑2012 IMR income of the trust for the income year; (i) for the purposes of applying Division 6 of Part III of the Income Tax Assessment Act 1936 to the trust that is a beneficiary, replace the references in that Division to share of the net income with references to share of the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (ii) for the purposes of applying Division 6E of Part III of the Income Tax Assessment Act 1936 to the trust that is a beneficiary, replace references in that Division to Division 6E net income with references to pre‑2012 non‑IMR Division 6E net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); (e) if the trust is a partner in a partnership—for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references to the individual interest of the partner in the partnership net income or partnership loss with references to the individual interest of the partner in the pre‑2012 non‑IMR partnership net income or pre‑2012 non‑IMR partnership loss (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997). > Note: The net income of a trust may include a share of the net income of another trust. Where there is a chain of trusts, these calculations are applied to each trust in the chain. (2) A trust’s pre‑2012 non‑IMR Division 6E net income in relation to an income year is determined by calculating the Division 6E net income (within the meaning of subsection 102UY(3) of the Income Tax Assessment Act 1936) of the trust as follows: (b) disregard the things mentioned in subparagraphs 102UW(b)(i) to (iii) of the Income Tax Assessment Act 1936 (which is about adjustments of Division 6 assessable amounts) in relation to the income year. (3) A trust’s pre‑2012 non‑IMR net capital gain in relation to an income year is determined by calculating the net capital gain of the trust as follows: (b) disregard any capital gain of the trust in relation to the income year that is referable to a pre‑2012 IMR capital gain of another IMR foreign fund that is a trust. A partnership’s pre‑2012 non‑IMR partnership net income or pre‑2012 non‑IMR partnership loss in relation to an income year is determined by calculating the net income or partnership loss of the partnership as follows: (b) disregard any amount included in the partnership’s assessable income under subsection 207‑35(1) to the extent that the amount is attributable to pre‑2012 IMR income of the partnership for the income year; (i) for the purposes of applying Division 6 of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in that Division to share of the net income with references to share of the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (ii) for the purposes of applying Division 6E of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace references in that Division to Division 6E net income with references to pre‑2012 non‑IMR Division 6E net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); (d) if the partnership is a partner in another partnership—for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references in that Division to the individual interest of the partner in the partnership net income or partnership loss with references to the individual interest of the partner in the pre‑2012 non‑IMR partnership net income or pre‑2012 non‑IMR partnership loss (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997). > Note: The net income of a partnership may include a share of the net income of another partnership. Where there is a chain of partnerships, these calculations are applied to each partnership in the chain. 880‑5 Certain income of sovereign entity in respect of a scheme is non‑assessable non‑exempt income if covered by a private ruling #### 880‑5 Certain income of sovereign entity in respect of a scheme is non‑assessable non‑exempt income if covered by a private ruling An amount of ordinary income or statutory income of a sovereign entity for an income year is not assessable income and is not exempt income if: (d) before 1 July 2026, the Commissioner gave the entity a private ruling confirming that income from the investment asset was not subject to income tax, or withholding tax, because of the doctrine of sovereign immunity; and regardless of whether the private ruling started to apply before 27 March 2018, or ceased to apply before 1 July 2026; and (ii) if the last income year to which the private ruling relates is a later income year than the 2025‑26 income year—that later income year, or an earlier income year. (c) the requirements in paragraphs 880‑5(b) to (g) are satisfied (on the assumption that references in those paragraphs to the investment asset were references to the CGT asset). Disregard a capital loss of a sovereign entity from a CGT event that happens at a time if, on the assumption that the loss were a capital gain that happened at that time, the capital gain would be disregarded because of section 880‑15. (c) before 1 July 2026, the Commissioner gave the entity a private ruling confirming that income from the asset was not subject to income tax, or withholding tax, because of the doctrine of sovereign immunity; and regardless of whether the private ruling started to apply before 27 March 2018, or ceased to apply before 1 July 2026; and (a) to have disposed of the asset, immediately before the day mentioned in subsection (5), for a consideration equal to its market value; and (b) to have acquired the asset again, immediately after the disposal mentioned in paragraph (a), for a consideration equal to the higher of the following: (b) if the asset is a revenue asset—determining whether an amount is included in, or can be deducted from, the assessable income of the entity. (a) disregard any capital gain or capital loss the sovereign entity makes because of the disposal mentioned in paragraph (2)(a); or (b) if the asset is a revenue asset—disregard any amount that could (apart from this subsection) be included in, or be deducted from, the assessable income of the entity as a result of that disposal. (i) the scheme mentioned in paragraph (1)(a) is not, when it is first carried out, materially different to the scheme specified in the private ruling; and (1) For the purposes of subsection 960‑20(2) of the Income Tax Assessment Act 1997, a tax loss is utilised to the extent that it is carried back under former Division 160 of that Act (which provided for a corporate loss carry back tax offset). (2) For the purposes of subsection 960‑20(4) of that Act, net exempt income for an income year is utilised to the extent that, because of it, an amount was reduced under step 2 of the method statement in former subsection 160‑15(2) of that Act (which was about calculating a loss carry back tax offset component). This Subdivision has effect for the purposes of the Income Tax Assessment Act 1936, the Income Tax Assessment Act 1997, the Taxation Administration Act 1953 and this Act. (b) the scheme has been or is registered by the Australian Securities and Investments Commission under section 601EB of the Corporations Law; and (c) the entity was a managed investment scheme as mentioned in paragraph (a) at all times from the commencement of 1 July 1998 until the registration of the scheme as mentioned in paragraph (b); and (e) changes to the scheme that were necessary to be made to enable the scheme to be registered as mentioned in paragraph (b) were made during the period beginning on 1 July 1998 and ending on 30 June 2000 (the transition period); and (i) the other changes were or are made only for the purpose of improving the administration or operation of the scheme; and (ii) there were no increases in the values of the interests of any members of the scheme as a result of the other changes or, if there were any such increases, they applied proportionately to the values of the interests of all the members of the scheme; and (iii) no reductions in the values of the interests of any members of the scheme occurred as a result of the other changes; and (2) If this Subdivision applies to an entity under subsection (1) because of a particular change referred to in that subsection, it also applies because of the change to a member of the entity, in relation to the member’s interests in the entity, if the member was a member immediately before, and immediately after, the change was made. Despite the changes made as mentioned in subsection 960‑105(1) to the managed investment scheme constituted by an entity to which this Subdivision applies: (a) the entity is taken, immediately after the changes were made or, if the changes were made at different times, immediately after the last of the changes was made, to be the same entity as existed immediately before the changes were made or, if the changes were made at different times, immediately before the first of the changes was made; and (c) the beneficial ownership of the interests in the entity of a member of the entity to whom, because of a particular change, this Subdivision applies in relation to those interests is taken not to have altered as a result of the change; and (ii) in so far as this Subdivision applies to a member of the entity because of a particular change, the change is taken not to have resulted in a CGT event in respect of the member in relation to the member’s interests in the entity. A declaration made by the Commissioner for the purposes of paragraph (b) of the definition of agent in subsection 995‑1(1) of the Income Tax Assessment Act 1997 and in force immediately before the Tax Laws Amendment (2006 Measures No. 2) Act 2006 received the Royal Assent continues to have effect for the purposes of section 960‑105 of the Income Tax Assessment Act 1997. (1) Subdivision 960‑M of the Income Tax Assessment Act 1997 (about indexation) applies to assessments for the 1998‑99 income year and later income years (except so far as it affects the car depreciation limit). (2) For the car depreciation limit (see section 42‑80 of the Income Tax Assessment Act 1997), that Subdivision applies to the 1998‑99 financial year and later financial years. (a) is a share in a company that was issued or allotted to you by the company or a unit in a unit trust that was issued to you by the trustee; and (2) In working out the cost base of the cost base of the asset, you ignore subsection 960‑275(3) and use the indexation factor in subsection 960‑275(2). ## Division 815 Cross‑border transfer pricing ## Subdivision 815 ‑A—Cross‑border transfer pricing ## 815‑1 Application of Subdivision 815‑A o 815‑1 Application of Subdivision 815‑A of the Income Tax Assessment Act 1997 ## 815‑5 Cross‑border transfer pricing guid 815‑5 Cross‑border transfer pricing guidance Despite section 815‑20 of the Income Tax Assessment Act 1997, the documents covered by that section for an income year that starts before 1 July 2012 are taken to be as follows: (a) the Model Tax Convention on Income and on Capital, and its Commentaries, as adopted by the Council of the Organisation for Economic Cooperation and Development and last amended before the start of the income year; (b) the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, as approved by that Council and last amended before the start of the income year. ## 815‑10 Scheme penalty applies in pre‑com 815‑10 Scheme penalty applies in pre‑commencement period as if only the old law applied (a) a determination under subsection 815‑30(1) of the Income Tax Assessment Act 1997 has effect in relation to an entity in an income year; and (2) Subdivision 284‑C in Schedule 1 to the Taxation Administration Act 1953 applies in relation to the entity and the income year as if: (b) each other provision of a taxation law applied in relation to the entity in the way it would have if that Subdivision had not been enacted. ## 815‑15 Application of Subdivisions 815‑B 815‑15 Application of Subdivisions 815‑B, 815‑C and 815‑D of the Income Tax Assessment Act 1997 (a) in respect of tax other than withholding tax—in relation to income years starting on or after the date mentioned in subsection (2); and (b) in respect of withholding tax—in relation to income derived, or taken to be derived, in income years starting on or after that date. (b) the day the Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Act 2013 receives the Royal Assent. ## Division 820 Application of the thin capitalisation rules ## 820‑10 Application of Division 820 of th 820‑10 Application of Division 820 of the Income Tax Assessment Act 1997 (1) Subject to this section, Division 820 of the Income Tax Assessment Act 1997 applies in relation to an income year that begins on or after 1 July 2001. (2) Subdivision 820‑L of that Act, to the extent that it relates to the requirements under section 820‑960 of that Act, applies only in relation to an income year that begins on or after 1 July 2002. ## 820‑12 Application of Division 974 of th 820‑12 Application of Division 974 of the Income Tax Assessment Act 1997 for the purposes of Division 820 of that Act #### 820‑12 Application of Division 974 of the Income Tax Assessment Act 1997 for the purposes of Division 820 of that Act (1) Division 974 of the Income Tax Assessment Act 1997 applies for the purposes of determining whether, for the purposes of Division 820 of that Act, an interest is a debt interest or an equity interest at any time on or after 1 July 2001 (whether or not the debt and equity test amendments apply to transactions in relation to that interest at that time). (2) In this section, debt and equity test amendments has the same meaning as in Part 4 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001. ## 820‑45 Transitional provision—accounting 820‑45 Transitional provision—accounting standards and prudential standards (2) Subject to subsection (3), the entity may choose, for any or all of those income years, to use the accounting standards in force under the Corporations Act 2001 immediately before 1 January 2005 (rather than the current accounting standards) for the purpose of calculating amounts applicable to the entity under Division 820 of the Income Tax Assessment Act 1997. > Note 1: Making the choice for an income year does not require the entity to maintain a full set of accounts based on those old accounting standards. (3) If the entity makes a choice under subsection (2) for an income year but an associate entity of that entity does not, the entity may, in working out its associate entity excess amount so far as it relates to that associate entity at a time in that year, use either the accounting standards in force under the Corporations Act 2001 immediately before 1 January 2005 or the current accounting standards. (4) If an ADI makes a choice under subsection (2) for an income year, the ADI must also choose to use for that year the prudential standards in force under the Banking Act 1959 immediately before 1 January 2005 (rather than the current prudential standards) for the purpose of calculating amounts applicable to the ADI under Division 820 of the Income Tax Assessment Act 1997. > Note 1: Making the choice for an income year does not require the entity to maintain capital adequacy calculations based on those old prudential standards. (5) For an income year for which an entity does not make a choice under subsection (2), the current accounting standards will be used for the purpose of calculating amounts applicable to the entity under Division 820 of the Income Tax Assessment Act 1997. (6) For an income year for which an ADI does not make a choice under subsection (2), the current prudential standards will be used for the purpose of calculating amounts applicable to the ADI under Division 820 of the Income Tax Assessment Act 1997. ## Division 830 Application of the foreign hybrid rules ## 830‑1 Standard application 830‑1 Standard application (1) Division 830 of the Income Tax Assessment Act 1997 applies to assessments for the 2003‑2004 income year, and each later income year, of a taxpayer who will as a result be a partner in an entity that is a foreign hybrid in relation to that income year. (2) Division 830 of the Income Tax Assessment Act 1997 applies for the purpose of working out the attributable income, in relation to an attributable taxpayer, for: (a) the statutory accounting period that starts on 1 July 2003 or on the day on which, as a result of an election under subsection 319(2) of the Income Tax Assessment Act 1936, the statutory accounting period that would otherwise start on 1 July 2003 starts; and (c) will as a result be a partner in an entity that is a foreign hybrid in relation to that statutory accounting period; or (d) has, directly or indirectly through one or more other entities, an interest in another entity that will, as a result, be a foreign hybrid in relation to that statutory accounting period. ## 830‑15 Modified version of income tax la 830‑15 Modified version of income tax law to apply for certain past income years (i) a statutory accounting period of a CFC, in relation to which the taxpayer was an attributable taxpayer at the end of that period and had an attribution percentage greater than nil, ended in the past income year; or then, for the purposes mentioned in subsection (2) of this section, the Income Tax Assessment Act 1936 applies with the modifications set out in section 830‑20 of this Act in working out: (a) any amendment of an assessment of the taxpayer for the past income year made before the commencement of this section; and (b) the making of an assessment of the taxpayer for the past income year between the commencement of this section and the end of 30 June 2004; and (d) the making of any assessment of the taxpayer for the past income year that takes place after 30 June 2004 and before the end of the time within which, if that assessment had been made on 1 July 2004, the Commissioner could amend the assessment under paragraph 170(2)(b), (c) or (d) of the Income Tax Assessment Act 1936 (as in force before the day on which the Tax Laws Amendment (Improvements to Self Assessment) Act (No. 2) 2005 received the Royal Assent); and (a) apart from this subsection, subsection (1) would apply to a taxpayer in relation to a CFC for a past income year; and (c) the taxpayer prepared the income tax return on the basis that, for the purposes of Part X of the Income Tax Assessment Act 1936, the CFC was a resident of no particular unlisted country; (d) if there is only one past income year to which paragraphs (a) to (c) of this subsection apply—the taxpayer elects that the subsection applies for the past income year; or (e) if there is more than one past income year to which paragraphs (a) to (c) of this subsection apply—the taxpayer elects that the subsection applies for all of those past income years. ## 830‑20 Modifications of income tax law 830‑20 Modifications of income tax law (1) This section sets out the modifications of the Income Tax Assessment Act 1936 that, if section 830‑15 of this Act so provides, apply in working out for a taxpayer: (2) If the CFC is not a resident of a particular listed country or a particular unlisted country for the purposes of Part X of the Income Tax Assessment Act 1936 (including after applying section 331 of that Act), then for the purposes of that Part, the CFC is taken to be a resident of the country under whose laws it was formed. (3) For the purpose of subsection 393(1) of the Income Tax Assessment Act 1936, if the taxpayer paid foreign tax (within the meaning of that Act) (the actual foreign tax) on its interest in an amount included in the notional assessable income of the CFC for the statutory accounting period, then the CFC is taken to have paid foreign tax (within the meaning of that Act) in respect of the amount equal to the actual foreign tax divided by the taxpayer’s direct attribution interest in the CFC at the end of the statutory accounting period. (a) on the assumption in paragraph 830‑15(1)(c) of this Act, another CFC (the tracing CFC) would have been a partner in the foreign entity that the CFC mentioned in subsection (1) of this section (the foreign hybrid CFC) would have been; and (b) the taxpayer had an attribution tracing interest in the tracing CFC that was taken into account in calculating the taxpayer’s attribution percentage for the foreign hybrid CFC at the end of the statutory accounting period; and (c) the tracing CFC paid foreign tax (within the meaning of that Act) (the actual foreign tax) on its interest in an amount included in the notional assessable income of the foreign hybrid CFC for the statutory accounting period; then the foreign hybrid CFC is taken to have paid foreign tax, (within the meaning of that Act) in respect of the amount included in its notional assessable income, equal to the actual foreign tax divided by the tracing CFC’s direct attribution interest in the foreign hybrid CFC at the end of the statutory accounting period. (5) For the purpose of section 573 of the Income Tax Assessment Act 1936, if the taxpayer paid foreign tax (within the meaning of that Act) (the actual foreign tax) on its interest in an amount included in the notional income of the FIF for the notional accounting period, then the FIF is taken to have paid foreign tax (within the meaning of that Act) in respect of that amount equal to the actual foreign tax divided by the attribution percentage applicable under section 581 of that Act to the taxpayer in respect of the taxpayer’s interests in the FIF at the end of the notional accounting period. ## Division 832 Hybrid mismatch rules ## Subdivision 832 ‑A—Application of Division 832 of the Income Tax Assessment Act 1997 ## 832‑10 Application of Division 832 of th 832‑10 Application of Division 832 of the Income Tax Assessment Act 1997 (other than imported hybrid mismatch rule) (1) The Subdivisions of Division 832 of the Income Tax Assessment Act 1997 covered by subsection (2) apply to assessments for income years starting on or after 1 January 2019. ## 832‑15 Application of imported hybrid mi 832‑15 Application of imported hybrid mismatch rule (1) Subdivision 832‑H (Imported hybrid mismatch) of the Income Tax Assessment Act 1997 applies to assessments for income years starting on or after 1 January 2019. (2) However, in applying Subdivision 832‑H to assessments for income years starting before 1 January 2020, items 2 and 3 of the table in subsection 832‑615(2) are to be disregarded. (3) Despite subsection (1), Subdivision 832‑H does not apply in relation to an offshore hybrid mismatch unless a deduction component of the mismatch arose in a foreign tax period that ends in an income year starting on or after 1 January 2019. (4) In determining whether subsection (3) is satisfied in relation to an offshore hybrid mismatch, disregard section 832‑635 of the Income Tax Assessment Act 1997. ## Division 840 Withholding taxes ## Subdivision 840 ‑M—Managed investment trust amounts ## 840‑805 Managed investment trust amounts 840‑805 Managed investment trust amounts (1) This section has effect for amounts represented by or reasonably attributable to fund payments made in relation to the first income year starting on or after the first 1 July after the day on which the Tax Laws Amendment (Election Commitments No. 1) Act 2008 receives the Royal Assent by a trust that is a managed investment trust in relation to that year. (2) If you are a resident of an information exchange country, subsection 840‑805(1) of the Income Tax Assessment Act 1997 does not apply to the amounts to the extent that it would otherwise apply to you. (b) if there are no taxation laws of that country applicable to the entity or the entity’s residency status cannot be determined under those laws: (ii) for another entity—the entity is incorporated or formed in that country and is carrying on a business in that country. (4) Instead, you are liable to pay income tax on the amounts (reduced as mentioned in subsection (5)) at the rate declared by the Parliament. ## 840‑810 Payment of tax under section 840 840‑810 Payment of tax under section 840‑805 (a) if subsection 840‑805(2) or (3) of the Income Tax Assessment Act 1997 would apply to you apart from section 840‑805 of this Act—the end of the month in which the relevant amount is paid, applied or dealt with; or (b) if subsection 840‑805(4) of that Act would so apply to you—the end of the month in which you become presently entitled to the relevant amount. ## Subdivision 840 ‑S—Labour mobility program withholding tax ## 840‑905 Application of Subdivision 840‑S 840‑905 Application of Subdivision 840‑S of the Income Tax Assessment Act 1997 ## Division 842 Exempt Australian source income and gains of foreign residents Despite section 815‑20 of the Income Tax Assessment Act 1997, the documents covered by that section for an income year that starts before 1 July 2012 are taken to be as follows: (a) the Model Tax Convention on Income and on Capital, and its Commentaries, as adopted by the Council of the Organisation for Economic Cooperation and Development and last amended before the start of the income year; (b) the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, as approved by that Council and last amended before the start of the income year. (a) a determination under subsection 815‑30(1) of the Income Tax Assessment Act 1997 has effect in relation to an entity in an income year; and (2) Subdivision 284‑C in Schedule 1 to the Taxation Administration Act 1953 applies in relation to the entity and the income year as if: (b) each other provision of a taxation law applied in relation to the entity in the way it would have if that Subdivision had not been enacted. (a) in respect of tax other than withholding tax—in relation to income years starting on or after the date mentioned in subsection (2); and (b) in respect of withholding tax—in relation to income derived, or taken to be derived, in income years starting on or after that date. (b) the day the Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Act 2013 receives the Royal Assent. (1) Subject to this section, Division 820 of the Income Tax Assessment Act 1997 applies in relation to an income year that begins on or after 1 July 2001. (2) Subdivision 820‑L of that Act, to the extent that it relates to the requirements under section 820‑960 of that Act, applies only in relation to an income year that begins on or after 1 July 2002. #### 820‑12 Application of Division 974 of the Income Tax Assessment Act 1997 for the purposes of Division 820 of that Act (1) Division 974 of the Income Tax Assessment Act 1997 applies for the purposes of determining whether, for the purposes of Division 820 of that Act, an interest is a debt interest or an equity interest at any time on or after 1 July 2001 (whether or not the debt and equity test amendments apply to transactions in relation to that interest at that time). (2) In this section, debt and equity test amendments has the same meaning as in Part 4 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001. (2) Subject to subsection (3), the entity may choose, for any or all of those income years, to use the accounting standards in force under the Corporations Act 2001 immediately before 1 January 2005 (rather than the current accounting standards) for the purpose of calculating amounts applicable to the entity under Division 820 of the Income Tax Assessment Act 1997. > Note 1: Making the choice for an income year does not require the entity to maintain a full set of accounts based on those old accounting standards. (3) If the entity makes a choice under subsection (2) for an income year but an associate entity of that entity does not, the entity may, in working out its associate entity excess amount so far as it relates to that associate entity at a time in that year, use either the accounting standards in force under the Corporations Act 2001 immediately before 1 January 2005 or the current accounting standards. (4) If an ADI makes a choice under subsection (2) for an income year, the ADI must also choose to use for that year the prudential standards in force under the Banking Act 1959 immediately before 1 January 2005 (rather than the current prudential standards) for the purpose of calculating amounts applicable to the ADI under Division 820 of the Income Tax Assessment Act 1997. > Note 1: Making the choice for an income year does not require the entity to maintain capital adequacy calculations based on those old prudential standards. (5) For an income year for which an entity does not make a choice under subsection (2), the current accounting standards will be used for the purpose of calculating amounts applicable to the entity under Division 820 of the Income Tax Assessment Act 1997. (6) For an income year for which an ADI does not make a choice under subsection (2), the current prudential standards will be used for the purpose of calculating amounts applicable to the ADI under Division 820 of the Income Tax Assessment Act 1997. (1) Division 830 of the Income Tax Assessment Act 1997 applies to assessments for the 2003‑2004 income year, and each later income year, of a taxpayer who will as a result be a partner in an entity that is a foreign hybrid in relation to that income year. (2) Division 830 of the Income Tax Assessment Act 1997 applies for the purpose of working out the attributable income, in relation to an attributable taxpayer, for: (a) the statutory accounting period that starts on 1 July 2003 or on the day on which, as a result of an election under subsection 319(2) of the Income Tax Assessment Act 1936, the statutory accounting period that would otherwise start on 1 July 2003 starts; and (c) will as a result be a partner in an entity that is a foreign hybrid in relation to that statutory accounting period; or (d) has, directly or indirectly through one or more other entities, an interest in another entity that will, as a result, be a foreign hybrid in relation to that statutory accounting period. (i) a statutory accounting period of a CFC, in relation to which the taxpayer was an attributable taxpayer at the end of that period and had an attribution percentage greater than nil, ended in the past income year; or then, for the purposes mentioned in subsection (2) of this section, the Income Tax Assessment Act 1936 applies with the modifications set out in section 830‑20 of this Act in working out: (a) any amendment of an assessment of the taxpayer for the past income year made before the commencement of this section; and (b) the making of an assessment of the taxpayer for the past income year between the commencement of this section and the end of 30 June 2004; and (d) the making of any assessment of the taxpayer for the past income year that takes place after 30 June 2004 and before the end of the time within which, if that assessment had been made on 1 July 2004, the Commissioner could amend the assessment under paragraph 170(2)(b), (c) or (d) of the Income Tax Assessment Act 1936 (as in force before the day on which the Tax Laws Amendment (Improvements to Self Assessment) Act (No. 2) 2005 received the Royal Assent); and (a) apart from this subsection, subsection (1) would apply to a taxpayer in relation to a CFC for a past income year; and (c) the taxpayer prepared the income tax return on the basis that, for the purposes of Part X of the Income Tax Assessment Act 1936, the CFC was a resident of no particular unlisted country; (d) if there is only one past income year to which paragraphs (a) to (c) of this subsection apply—the taxpayer elects that the subsection applies for the past income year; or (e) if there is more than one past income year to which paragraphs (a) to (c) of this subsection apply—the taxpayer elects that the subsection applies for all of those past income years. (1) This section sets out the modifications of the Income Tax Assessment Act 1936 that, if section 830‑15 of this Act so provides, apply in working out for a taxpayer: (2) If the CFC is not a resident of a particular listed country or a particular unlisted country for the purposes of Part X of the Income Tax Assessment Act 1936 (including after applying section 331 of that Act), then for the purposes of that Part, the CFC is taken to be a resident of the country under whose laws it was formed. (3) For the purpose of subsection 393(1) of the Income Tax Assessment Act 1936, if the taxpayer paid foreign tax (within the meaning of that Act) (the actual foreign tax) on its interest in an amount included in the notional assessable income of the CFC for the statutory accounting period, then the CFC is taken to have paid foreign tax (within the meaning of that Act) in respect of the amount equal to the actual foreign tax divided by the taxpayer’s direct attribution interest in the CFC at the end of the statutory accounting period. (a) on the assumption in paragraph 830‑15(1)(c) of this Act, another CFC (the tracing CFC) would have been a partner in the foreign entity that the CFC mentioned in subsection (1) of this section (the foreign hybrid CFC) would have been; and (b) the taxpayer had an attribution tracing interest in the tracing CFC that was taken into account in calculating the taxpayer’s attribution percentage for the foreign hybrid CFC at the end of the statutory accounting period; and (c) the tracing CFC paid foreign tax (within the meaning of that Act) (the actual foreign tax) on its interest in an amount included in the notional assessable income of the foreign hybrid CFC for the statutory accounting period; then the foreign hybrid CFC is taken to have paid foreign tax, (within the meaning of that Act) in respect of the amount included in its notional assessable income, equal to the actual foreign tax divided by the tracing CFC’s direct attribution interest in the foreign hybrid CFC at the end of the statutory accounting period. (5) For the purpose of section 573 of the Income Tax Assessment Act 1936, if the taxpayer paid foreign tax (within the meaning of that Act) (the actual foreign tax) on its interest in an amount included in the notional income of the FIF for the notional accounting period, then the FIF is taken to have paid foreign tax (within the meaning of that Act) in respect of that amount equal to the actual foreign tax divided by the attribution percentage applicable under section 581 of that Act to the taxpayer in respect of the taxpayer’s interests in the FIF at the end of the notional accounting period. (1) The Subdivisions of Division 832 of the Income Tax Assessment Act 1997 covered by subsection (2) apply to assessments for income years starting on or after 1 January 2019. (1) Subdivision 832‑H (Imported hybrid mismatch) of the Income Tax Assessment Act 1997 applies to assessments for income years starting on or after 1 January 2019. (2) However, in applying Subdivision 832‑H to assessments for income years starting before 1 January 2020, items 2 and 3 of the table in subsection 832‑615(2) are to be disregarded. (3) Despite subsection (1), Subdivision 832‑H does not apply in relation to an offshore hybrid mismatch unless a deduction component of the mismatch arose in a foreign tax period that ends in an income year starting on or after 1 January 2019. (4) In determining whether subsection (3) is satisfied in relation to an offshore hybrid mismatch, disregard section 832‑635 of the Income Tax Assessment Act 1997. (1) This section has effect for amounts represented by or reasonably attributable to fund payments made in relation to the first income year starting on or after the first 1 July after the day on which the Tax Laws Amendment (Election Commitments No. 1) Act 2008 receives the Royal Assent by a trust that is a managed investment trust in relation to that year. (2) If you are a resident of an information exchange country, subsection 840‑805(1) of the Income Tax Assessment Act 1997 does not apply to the amounts to the extent that it would otherwise apply to you. (b) if there are no taxation laws of that country applicable to the entity or the entity’s residency status cannot be determined under those laws: (ii) for another entity—the entity is incorporated or formed in that country and is carrying on a business in that country. (4) Instead, you are liable to pay income tax on the amounts (reduced as mentioned in subsection (5)) at the rate declared by the Parliament. (a) if subsection 840‑805(2) or (3) of the Income Tax Assessment Act 1997 would apply to you apart from section 840‑805 of this Act—the end of the month in which the relevant amount is paid, applied or dealt with; or (b) if subsection 840‑805(4) of that Act would so apply to you—the end of the month in which you become presently entitled to the relevant amount. (b) if an entity chooses to apply the new Subdivision 842‑I in relation to the 2011‑12, 2012‑13, 2013‑14 and 2014‑15 income years—those income years. > new Subdivision 842‑I means Subdivision 842‑I (Investment Manager Regime) of the Income Tax Assessment Act 1997, as substituted by Schedule 7 to the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015. > Note: The new Subdivision 842‑I replaced a previous version of that Subdivision, which applied in relation to assessments for the 2010‑11 income year and later income years (see item 17 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012). (b) Subdivision 842‑I (Investment Manager Regime) of the Income Tax Assessment Act 1997, as substituted by Schedule 7 to the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 (the new IMR Schedule). (a) it is an IMR entity (within the meaning given by section 842‑220 of the Income Tax Assessment Act 1997, as inserted by the new IMR Schedule); and (b) subject to subsection (3) of this section, it is an IMR widely held entity (within the meaning given by sections 842‑230 and 842‑240 of the Income Tax Assessment Act 1997, as inserted by the new IMR Schedule); and (3) Treat subsection 842‑230(1) of the Income Tax Assessment Act 1997, as inserted by the new IMR Schedule, as not applying to the entity. If an IMR entity makes a choice under paragraph 842‑208(2)(c), section 94T of the Income Tax Assessment Act 1936 as amended by Schedule 7 to the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015, applies to the entity in relation to the income years in relation to which this Subdivision applies to the entity. (1) The object of this section is to disregard, for the purpose of calculating the assessable income of a corporate tax entity that is an IMR foreign fund, certain gains and losses that arise in the 2010‑11 income year, or an earlier income year, in respect of certain kinds of financial arrangements. (b) the corporate tax entity has pre‑2012 IMR income, a pre‑2012 IMR deduction, a pre‑2012 IMR capital gain or a pre‑2012 IMR capital loss in relation to the income year; and (c) the corporate tax entity has not lodged an income tax return in relation to the 2010‑11 income year, or any earlier income year, before the day that item 1 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012 commences; and (d) the Commissioner did not, before 18 December 2010, make an assessment of the taxable income of the corporate tax entity for any income year. > Note 1: For the purposes of this Act, pre‑2012 IMR income is defined in subsections 842‑270(1) and (2) of the Income Tax Assessment Act 1997 and pre‑2012 IMR capital gain is defined in subsection 842‑270(3) of that Act. > Note 2: Pre‑2012 IMR deduction is defined in subsections 842‑230(1) and (2) of this Act and pre‑2012 IMR capital loss is defined in section 842‑235 of this Act. (4) Subsection (3) does not apply if the Commissioner has reason to believe that there has been fraud by the corporate tax entity in relation to any income year. (5) Subsection (3) does not apply if before 18 December 2010 the Commissioner notified the corporate tax entity that an audit or compliance review would be undertaken in relation to any income year. (a) a foreign resident beneficiary of an IMR foreign fund in relation to the 2010‑11 income year or an earlier income year is not subject to Australian income tax in respect of pre‑2012 IMR income or a pre‑2012 IMR capital gain of the fund (or in respect of an amount that is referable to pre‑2012 IMR income or a pre‑2012 IMR capital gain of the fund) for the income year; and (b) the foreign resident beneficiary of the fund is not able to claim a deduction or utilise a tax loss in relation to the income year to the extent that the deduction or tax loss was incurred or made in respect of an amount that is: (c) this section does not provide any tax concession to an Australian resident that invests in the fund (whether directly or indirectly through one or more interposed entities). (2) This section applies to a beneficiary of a trust in relation to the 2010‑11 income year, or an earlier income year, if: (b) the beneficiary is not a trust or partnership at any time during the income year (other than a foreign superannuation fund); and (c) neither the trust nor the beneficiary has lodged an income tax return in relation to the 2010‑11 income year, or any earlier income year, before the day that item 1 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012 commences; and > Note: A trust that is an IMR foreign fund is generally subject to the general tax rules that apply to trusts, subject to the modifications in this Subdivision: see Division 6 of Part III of the Income Tax Assessment Act 1936. Also see section 842‑225 of this Act, which deals with trustees of IMR foreign funds. (a) for the purposes of applying Division 6 of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in that Division to share of the net income with references to share of the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (b) for the purposes of applying subsections 98A(1) and (3) of Division 6 of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in those subsections to individual interest of the beneficiary in the net income with references to individual interest of the beneficiary in the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (c) for the purposes of applying Division 6E of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in that Division to Division 6E net income with references to pre‑2012 non‑IMR Division 6E net income (within the meaning of subsection 842‑240(2) of the Income Tax (Transitional Provisions) Act 1997); and (d) in applying subsection 115‑215(3) of the Income Tax Assessment Act 1997 to the beneficiary, replace the reference in that subsection to each capital gain of the trust estate with a reference to each capital gain of the trust estate that is a pre‑2012 non‑IMR net capital gain (or is referable to a pre‑2012 non‑IMR net capital gain of the trust estate) (within the meaning of subsection 842‑240(3) of the Income Tax (Transitional Provisions) Act 1997); and (i) replace references in that section to net income of the trust estate with references to pre‑2012 non‑IMR net income of the trust estate (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (ii) replace the reference in that section to net capital gain (if any) with a reference to pre‑2012 non‑IMR net capital gain (if any) (within the meaning of subsection 842‑240(3) of the Income Tax (Transitional Provisions) Act 1997). (4) For the purposes of applying paragraph 115‑225(1)(a) of the Income Tax Assessment Act 1997 to the beneficiary in respect of the income year: (a) disregard a capital gain of the trust to the extent the capital gain is a pre‑2012 IMR capital gain (or is referable to a pre‑2012 IMR capital gain of the fund); and (b) disregard a pre‑2012 IMR capital loss of the trust for the purposes of determining the amount of the capital gain remaining after applying steps 1 to 4 of the method statement in subsection 102‑5(1) of that Act; and (c) disregard a net capital loss of the trust to the extent that it is attributable to a pre‑2012 IMR capital loss for the purposes of determining the amount of the capital gain remaining after applying steps 1 to 4 of the method statement in subsection 102‑5(1). (5) Subsections (3) and (4) do not apply if the Commissioner has reason to believe that there has been fraud by the trust in relation to any income year. (6) Subsections (3) and (4) do not apply if before 18 December 2010 the Commissioner notified the trust that an audit or compliance review would be undertaken in relation to any income year. (a) a foreign resident partner of an IMR foreign fund in relation to the 2010‑11 income year, or an earlier income year, is not subject to any Australian income tax in respect of pre‑2012 IMR income or a pre‑2012 IMR capital gain (or in respect of an amount that is referable to pre‑2012 IMR income or a pre‑2012 IMR capital gain) for the income year; and (b) the foreign resident partner of the fund is not able to claim a deduction or utilise a tax loss in relation to the income year to the extent that the deduction or tax loss was incurred or made in respect of an amount that is: (c) this section does not provide any tax concession to an Australian resident that invests in the fund (whether directly or indirectly through one or more interposed entities). (2) This section applies to a partner in a partnership in relation to the 2010‑11 income year, or an earlier income year, if: (b) the partner is not a trust or a partnership at any time during the income year (other than a foreign superannuation fund); and (c) neither the partnership nor the partner has lodged an income tax return in relation to the 2010‑11 income year, or any earlier income year, before the day that item 1 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012 commences; and (d) the Commissioner did not, before 18 December 2010, make an assessment of the taxable income of the partner for any income year. > Note: A partnership that is an IMR foreign fund is generally subject to the general tax rules that apply to partnerships, subject to the modifications set out in this Subdivision: see Division 5 of Part III of the Income Tax Assessment Act 1936. (a) for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references in that Division to the individual interest of the partner in the net income of the partnership with references to the individual interest of the partner in the pre‑2012 non‑IMR partnership net income (within the meaning of section 842‑245 of the Income Tax (Transitional Provisions) Act 1997); and (b) for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references in that Division to the individual interest of the partner in the partnership loss with references to the individual interest of the partner in the pre‑2012 non‑IMR partnership loss (within the meaning of section 842‑245 of the Income Tax (Transitional Provisions) Act 1997); and (c) disregard the partner’s pre‑2012 IMR capital gain or an amount that is referable to a pre‑2012 IMR capital gain (within the meaning of subsection 842‑270(3) of the Income Tax Assessment Act 1997) or pre‑2012 IMR capital loss or an amount that is referable to a pre‑2012 IMR capital loss (within the meaning of that term in section 842‑235 of this Act). (4) Subsection (3) does not apply if the Commissioner has reason to believe that there has been fraud by the partnership in relation to any income year. (5) Subsection (3) does not apply if before 18 December 2010 the Commissioner notified the partnership that an audit or compliance review would be undertaken in relation to any income year. (1) The object of this section is to ensure that the following provisions interact appropriately with the tax concessions mentioned in subsection 842‑210(1), paragraphs 842‑215(1)(a) and (b) and paragraphs 842‑220(1)(a) and (b) in respect of the 2010‑11 income year or an earlier income year: > Note: Division 6 of Part III of the Income Tax Assessment Act 1936, Division 115 of the Income Tax Assessment Act 1997, and all other provisions of those Acts apply to the trustee of an IMR foreign fund, subject to the modifications in this section. (2) This section applies to the 2010‑11 income year or an earlier income year of a trustee of a trust that is an IMR foreign fund in relation to that income year. (a) disregard a capital gain of the IMR foreign fund to the extent that the capital gain is a pre‑2012 IMR capital gain; and (b) disregard a pre‑2012 IMR capital loss of the IMR foreign fund for the purposes of determining the amount of the capital gain remaining after applying steps 1 to 4 of the method statement in subsection 102‑5(1); and (c) disregard a net capital loss of the IMR foreign fund to the extent that it is attributable to a pre‑2012 IMR capital loss for the purposes of determining how much of a capital gain that is not a pre‑2012 IMR capital gain remains after applying steps 1 to 4 of the method statement in subsection 102‑5(1). > Note: The effect of this subsection is that the increase to the assessable amount which occurs as a result of section 115‑220 of the Income Tax Assessment Act 1997 is calculated with reference to the capital gains of the IMR foreign fund that are not IMR capital gains or amounts referable to IMR capital gains (rather than by calculating the increase with reference to all capital gains of the fund). (4) For the purposes of applying section 115‑225 of the Income Tax Assessment Act 1997 in respect of section 115‑220, make the following assumptions: (a) replace the references in section 115‑225 to the net income of the trust estate with references to the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997) of the trust estate; (b) replace the references in section 115‑225 to net capital gain (if any) with a reference to pre‑2012 non‑IMR net capital gain (if any) (within the meaning of subsection 842‑240(3) of the Income Tax (Transitional Provisions) Act 1997). (5) For the purposes of applying section 98 of the Income Tax Assessment Act 1936 in respect of an income year that is the 2010‑11 income year or an earlier income year, replace references in that section to net income with references to pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997). > Note: The effect of this subsection is that where section 98 of the Income Tax Assessment Act 1936 applies to the trustee of a trust that is an IMR foreign fund, the trustee is only assessed and made liable to pay tax in respect of pre‑2012 non‑IMR net income of the fund (rather than in respect of all net income of the fund to which section 98 would otherwise apply). (6) For the purposes of applying section 99E of the Income Tax Assessment Act 1936 in respect of an income year that is the 2010‑11 income year or an earlier income year: (a) replace the reference to so much of the net income with a reference to so much of the net income or pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997) as the case may be; and (b) replace the reference to a part of the net income of another trust estate with a reference to a part of the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997) of another trust estate. > Note: The effect of this subsection is that the trustee of a trust that receives a distribution of pre‑2012 non‑IMR net income from another trust is not required to apply section 98, 99 or 99A of the Income Tax Assessment Act 1936 to those amounts. (7) The IMR foreign fund cannot utilise a tax loss or net capital loss in relation to the income year, or in any future income year, to the extent the loss is attributable to pre‑2012 IMR income, a pre‑2012 IMR capital gain, a pre‑2012 IMR deduction or a pre‑2012 IMR capital loss. (1) The pre‑2012 IMR deduction of an IMR foreign fund for an income year is the amount of the fund’s deductions for the income year to the extent to which they: The pre‑2012 IMR capital loss of an IMR foreign fund for an income year is the sum of the fund’s capital losses made in the income year that are attributable to CGT assets that are financial arrangements covered by section 842‑245 of the Income Tax Assessment Act 1997. (1) A trust’s pre‑2012 non‑IMR net income in relation to an income year is determined by calculating the net income of the trust as follows: (a) for income years prior to the 2010‑11 income year—disregard the pre‑2012 IMR capital gain and pre‑2012 IMR capital loss; (c) disregard any amount that is included in the trust’s assessable income under subsection 207‑35(1) to the extent that the amount is attributable to pre‑2012 IMR income of the trust for the income year; (i) for the purposes of applying Division 6 of Part III of the Income Tax Assessment Act 1936 to the trust that is a beneficiary, replace the references in that Division to share of the net income with references to share of the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (ii) for the purposes of applying Division 6E of Part III of the Income Tax Assessment Act 1936 to the trust that is a beneficiary, replace references in that Division to Division 6E net income with references to pre‑2012 non‑IMR Division 6E net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); (e) if the trust is a partner in a partnership—for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references to the individual interest of the partner in the partnership net income or partnership loss with references to the individual interest of the partner in the pre‑2012 non‑IMR partnership net income or pre‑2012 non‑IMR partnership loss (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997). > Note: The net income of a trust may include a share of the net income of another trust. Where there is a chain of trusts, these calculations are applied to each trust in the chain. (2) A trust’s pre‑2012 non‑IMR Division 6E net income in relation to an income year is determined by calculating the Division 6E net income (within the meaning of subsection 102UY(3) of the Income Tax Assessment Act 1936) of the trust as follows: (b) disregard the things mentioned in subparagraphs 102UW(b)(i) to (iii) of the Income Tax Assessment Act 1936 (which is about adjustments of Division 6 assessable amounts) in relation to the income year. (3) A trust’s pre‑2012 non‑IMR net capital gain in relation to an income year is determined by calculating the net capital gain of the trust as follows: (b) disregard any capital gain of the trust in relation to the income year that is referable to a pre‑2012 IMR capital gain of another IMR foreign fund that is a trust. A partnership’s pre‑2012 non‑IMR partnership net income or pre‑2012 non‑IMR partnership loss in relation to an income year is determined by calculating the net income or partnership loss of the partnership as follows: (b) disregard any amount included in the partnership’s assessable income under subsection 207‑35(1) to the extent that the amount is attributable to pre‑2012 IMR income of the partnership for the income year; (i) for the purposes of applying Division 6 of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in that Division to share of the net income with references to share of the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (ii) for the purposes of applying Division 6E of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace references in that Division to Division 6E net income with references to pre‑2012 non‑IMR Division 6E net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); (d) if the partnership is a partner in another partnership—for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references in that Division to the individual interest of the partner in the partnership net income or partnership loss with references to the individual interest of the partner in the pre‑2012 non‑IMR partnership net income or pre‑2012 non‑IMR partnership loss (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997). > Note: The net income of a partnership may include a share of the net income of another partnership. Where there is a chain of partnerships, these calculations are applied to each partnership in the chain. 880‑5 Certain income of sovereign entity in respect of a scheme is non‑assessable non‑exempt income if covered by a private ruling #### 880‑5 Certain income of sovereign entity in respect of a scheme is non‑assessable non‑exempt income if covered by a private ruling An amount of ordinary income or statutory income of a sovereign entity for an income year is not assessable income and is not exempt income if: (d) before 1 July 2026, the Commissioner gave the entity a private ruling confirming that income from the investment asset was not subject to income tax, or withholding tax, because of the doctrine of sovereign immunity; and regardless of whether the private ruling started to apply before 27 March 2018, or ceased to apply before 1 July 2026; and (ii) if the last income year to which the private ruling relates is a later income year than the 2025‑26 income year—that later income year, or an earlier income year. (c) the requirements in paragraphs 880‑5(b) to (g) are satisfied (on the assumption that references in those paragraphs to the investment asset were references to the CGT asset). Disregard a capital loss of a sovereign entity from a CGT event that happens at a time if, on the assumption that the loss were a capital gain that happened at that time, the capital gain would be disregarded because of section 880‑15. (c) before 1 July 2026, the Commissioner gave the entity a private ruling confirming that income from the asset was not subject to income tax, or withholding tax, because of the doctrine of sovereign immunity; and regardless of whether the private ruling started to apply before 27 March 2018, or ceased to apply before 1 July 2026; and (a) to have disposed of the asset, immediately before the day mentioned in subsection (5), for a consideration equal to its market value; and (b) to have acquired the asset again, immediately after the disposal mentioned in paragraph (a), for a consideration equal to the higher of the following: (b) if the asset is a revenue asset—determining whether an amount is included in, or can be deducted from, the assessable income of the entity. (a) disregard any capital gain or capital loss the sovereign entity makes because of the disposal mentioned in paragraph (2)(a); or (b) if the asset is a revenue asset—disregard any amount that could (apart from this subsection) be included in, or be deducted from, the assessable income of the entity as a result of that disposal. (i) the scheme mentioned in paragraph (1)(a) is not, when it is first carried out, materially different to the scheme specified in the private ruling; and (1) For the purposes of subsection 960‑20(2) of the Income Tax Assessment Act 1997, a tax loss is utilised to the extent that it is carried back under former Division 160 of that Act (which provided for a corporate loss carry back tax offset). (2) For the purposes of subsection 960‑20(4) of that Act, net exempt income for an income year is utilised to the extent that, because of it, an amount was reduced under step 2 of the method statement in former subsection 160‑15(2) of that Act (which was about calculating a loss carry back tax offset component). This Subdivision has effect for the purposes of the Income Tax Assessment Act 1936, the Income Tax Assessment Act 1997, the Taxation Administration Act 1953 and this Act. (b) the scheme has been or is registered by the Australian Securities and Investments Commission under section 601EB of the Corporations Law; and (c) the entity was a managed investment scheme as mentioned in paragraph (a) at all times from the commencement of 1 July 1998 until the registration of the scheme as mentioned in paragraph (b); and (e) changes to the scheme that were necessary to be made to enable the scheme to be registered as mentioned in paragraph (b) were made during the period beginning on 1 July 1998 and ending on 30 June 2000 (the transition period); and (i) the other changes were or are made only for the purpose of improving the administration or operation of the scheme; and (ii) there were no increases in the values of the interests of any members of the scheme as a result of the other changes or, if there were any such increases, they applied proportionately to the values of the interests of all the members of the scheme; and (iii) no reductions in the values of the interests of any members of the scheme occurred as a result of the other changes; and (2) If this Subdivision applies to an entity under subsection (1) because of a particular change referred to in that subsection, it also applies because of the change to a member of the entity, in relation to the member’s interests in the entity, if the member was a member immediately before, and immediately after, the change was made. Despite the changes made as mentioned in subsection 960‑105(1) to the managed investment scheme constituted by an entity to which this Subdivision applies: (a) the entity is taken, immediately after the changes were made or, if the changes were made at different times, immediately after the last of the changes was made, to be the same entity as existed immediately before the changes were made or, if the changes were made at different times, immediately before the first of the changes was made; and (c) the beneficial ownership of the interests in the entity of a member of the entity to whom, because of a particular change, this Subdivision applies in relation to those interests is taken not to have altered as a result of the change; and (ii) in so far as this Subdivision applies to a member of the entity because of a particular change, the change is taken not to have resulted in a CGT event in respect of the member in relation to the member’s interests in the entity. A declaration made by the Commissioner for the purposes of paragraph (b) of the definition of agent in subsection 995‑1(1) of the Income Tax Assessment Act 1997 and in force immediately before the Tax Laws Amendment (2006 Measures No. 2) Act 2006 received the Royal Assent continues to have effect for the purposes of section 960‑105 of the Income Tax Assessment Act 1997. (1) Subdivision 960‑M of the Income Tax Assessment Act 1997 (about indexation) applies to assessments for the 1998‑99 income year and later income years (except so far as it affects the car depreciation limit). (2) For the car depreciation limit (see section 42‑80 of the Income Tax Assessment Act 1997), that Subdivision applies to the 1998‑99 financial year and later financial years. (a) is a share in a company that was issued or allotted to you by the company or a unit in a unit trust that was issued to you by the trustee; and (2) In working out the cost base of the cost base of the asset, you ignore subsection 960‑275(3) and use the indexation factor in subsection 960‑275(2). ## Subdivision 842 ‑I—Investment manager regime ## 842‑207 Application of replacement versi 842‑207 Application of replacement version of Subdivision 842‑I (b) if an entity chooses to apply the new Subdivision 842‑I in relation to the 2011‑12, 2012‑13, 2013‑14 and 2014‑15 income years—those income years. > new Subdivision 842‑I means Subdivision 842‑I (Investment Manager Regime) of the Income Tax Assessment Act 1997, as substituted by Schedule 7 to the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015. > Note: The new Subdivision 842‑I replaced a previous version of that Subdivision, which applied in relation to assessments for the 2010‑11 income year and later income years (see item 17 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012). ## 842‑208 Modified meaning of IMR foreign 842‑208 Modified meaning of IMR foreign fund for the purposes of earlier income years (b) Subdivision 842‑I (Investment Manager Regime) of the Income Tax Assessment Act 1997, as substituted by Schedule 7 to the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 (the new IMR Schedule). (a) it is an IMR entity (within the meaning given by section 842‑220 of the Income Tax Assessment Act 1997, as inserted by the new IMR Schedule); and (b) subject to subsection (3) of this section, it is an IMR widely held entity (within the meaning given by sections 842‑230 and 842‑240 of the Income Tax Assessment Act 1997, as inserted by the new IMR Schedule); and (3) Treat subsection 842‑230(1) of the Income Tax Assessment Act 1997, as inserted by the new IMR Schedule, as not applying to the entity. ## 842‑209 Residence of corporate limited p 842‑209 Residence of corporate limited partnerships If an IMR entity makes a choice under paragraph 842‑208(2)(c), section 94T of the Income Tax Assessment Act 1936 as amended by Schedule 7 to the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015, applies to the entity in relation to the income years in relation to which this Subdivision applies to the entity. ## 842‑210 Treatment of IMR foreign fund th 842‑210 Treatment of IMR foreign fund that is a corporate tax entity (1) The object of this section is to disregard, for the purpose of calculating the assessable income of a corporate tax entity that is an IMR foreign fund, certain gains and losses that arise in the 2010‑11 income year, or an earlier income year, in respect of certain kinds of financial arrangements. (b) the corporate tax entity has pre‑2012 IMR income, a pre‑2012 IMR deduction, a pre‑2012 IMR capital gain or a pre‑2012 IMR capital loss in relation to the income year; and (c) the corporate tax entity has not lodged an income tax return in relation to the 2010‑11 income year, or any earlier income year, before the day that item 1 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012 commences; and (d) the Commissioner did not, before 18 December 2010, make an assessment of the taxable income of the corporate tax entity for any income year. > Note 1: For the purposes of this Act, pre‑2012 IMR income is defined in subsections 842‑270(1) and (2) of the Income Tax Assessment Act 1997 and pre‑2012 IMR capital gain is defined in subsection 842‑270(3) of that Act. > Note 2: Pre‑2012 IMR deduction is defined in subsections 842‑230(1) and (2) of this Act and pre‑2012 IMR capital loss is defined in section 842‑235 of this Act. (4) Subsection (3) does not apply if the Commissioner has reason to believe that there has been fraud by the corporate tax entity in relation to any income year. (5) Subsection (3) does not apply if before 18 December 2010 the Commissioner notified the corporate tax entity that an audit or compliance review would be undertaken in relation to any income year. ## 842‑215 Treatment of foreign resident be 842‑215 Treatment of foreign resident beneficiary that is not a trust or partnership (a) a foreign resident beneficiary of an IMR foreign fund in relation to the 2010‑11 income year or an earlier income year is not subject to Australian income tax in respect of pre‑2012 IMR income or a pre‑2012 IMR capital gain of the fund (or in respect of an amount that is referable to pre‑2012 IMR income or a pre‑2012 IMR capital gain of the fund) for the income year; and (b) the foreign resident beneficiary of the fund is not able to claim a deduction or utilise a tax loss in relation to the income year to the extent that the deduction or tax loss was incurred or made in respect of an amount that is: (c) this section does not provide any tax concession to an Australian resident that invests in the fund (whether directly or indirectly through one or more interposed entities). (2) This section applies to a beneficiary of a trust in relation to the 2010‑11 income year, or an earlier income year, if: (b) the beneficiary is not a trust or partnership at any time during the income year (other than a foreign superannuation fund); and (c) neither the trust nor the beneficiary has lodged an income tax return in relation to the 2010‑11 income year, or any earlier income year, before the day that item 1 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012 commences; and > Note: A trust that is an IMR foreign fund is generally subject to the general tax rules that apply to trusts, subject to the modifications in this Subdivision: see Division 6 of Part III of the Income Tax Assessment Act 1936. Also see section 842‑225 of this Act, which deals with trustees of IMR foreign funds. (a) for the purposes of applying Division 6 of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in that Division to share of the net income with references to share of the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (b) for the purposes of applying subsections 98A(1) and (3) of Division 6 of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in those subsections to individual interest of the beneficiary in the net income with references to individual interest of the beneficiary in the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (c) for the purposes of applying Division 6E of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in that Division to Division 6E net income with references to pre‑2012 non‑IMR Division 6E net income (within the meaning of subsection 842‑240(2) of the Income Tax (Transitional Provisions) Act 1997); and (d) in applying subsection 115‑215(3) of the Income Tax Assessment Act 1997 to the beneficiary, replace the reference in that subsection to each capital gain of the trust estate with a reference to each capital gain of the trust estate that is a pre‑2012 non‑IMR net capital gain (or is referable to a pre‑2012 non‑IMR net capital gain of the trust estate) (within the meaning of subsection 842‑240(3) of the Income Tax (Transitional Provisions) Act 1997); and (i) replace references in that section to net income of the trust estate with references to pre‑2012 non‑IMR net income of the trust estate (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (ii) replace the reference in that section to net capital gain (if any) with a reference to pre‑2012 non‑IMR net capital gain (if any) (within the meaning of subsection 842‑240(3) of the Income Tax (Transitional Provisions) Act 1997). (4) For the purposes of applying paragraph 115‑225(1)(a) of the Income Tax Assessment Act 1997 to the beneficiary in respect of the income year: (a) disregard a capital gain of the trust to the extent the capital gain is a pre‑2012 IMR capital gain (or is referable to a pre‑2012 IMR capital gain of the fund); and (b) disregard a pre‑2012 IMR capital loss of the trust for the purposes of determining the amount of the capital gain remaining after applying steps 1 to 4 of the method statement in subsection 102‑5(1) of that Act; and (c) disregard a net capital loss of the trust to the extent that it is attributable to a pre‑2012 IMR capital loss for the purposes of determining the amount of the capital gain remaining after applying steps 1 to 4 of the method statement in subsection 102‑5(1). (5) Subsections (3) and (4) do not apply if the Commissioner has reason to believe that there has been fraud by the trust in relation to any income year. (6) Subsections (3) and (4) do not apply if before 18 December 2010 the Commissioner notified the trust that an audit or compliance review would be undertaken in relation to any income year. ## 842‑220 Treatment of foreign resident pa 842‑220 Treatment of foreign resident partner that is not a trust or partnership (a) a foreign resident partner of an IMR foreign fund in relation to the 2010‑11 income year, or an earlier income year, is not subject to any Australian income tax in respect of pre‑2012 IMR income or a pre‑2012 IMR capital gain (or in respect of an amount that is referable to pre‑2012 IMR income or a pre‑2012 IMR capital gain) for the income year; and (b) the foreign resident partner of the fund is not able to claim a deduction or utilise a tax loss in relation to the income year to the extent that the deduction or tax loss was incurred or made in respect of an amount that is: (c) this section does not provide any tax concession to an Australian resident that invests in the fund (whether directly or indirectly through one or more interposed entities). (2) This section applies to a partner in a partnership in relation to the 2010‑11 income year, or an earlier income year, if: (b) the partner is not a trust or a partnership at any time during the income year (other than a foreign superannuation fund); and (c) neither the partnership nor the partner has lodged an income tax return in relation to the 2010‑11 income year, or any earlier income year, before the day that item 1 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012 commences; and (d) the Commissioner did not, before 18 December 2010, make an assessment of the taxable income of the partner for any income year. > Note: A partnership that is an IMR foreign fund is generally subject to the general tax rules that apply to partnerships, subject to the modifications set out in this Subdivision: see Division 5 of Part III of the Income Tax Assessment Act 1936. (a) for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references in that Division to the individual interest of the partner in the net income of the partnership with references to the individual interest of the partner in the pre‑2012 non‑IMR partnership net income (within the meaning of section 842‑245 of the Income Tax (Transitional Provisions) Act 1997); and (b) for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references in that Division to the individual interest of the partner in the partnership loss with references to the individual interest of the partner in the pre‑2012 non‑IMR partnership loss (within the meaning of section 842‑245 of the Income Tax (Transitional Provisions) Act 1997); and (c) disregard the partner’s pre‑2012 IMR capital gain or an amount that is referable to a pre‑2012 IMR capital gain (within the meaning of subsection 842‑270(3) of the Income Tax Assessment Act 1997) or pre‑2012 IMR capital loss or an amount that is referable to a pre‑2012 IMR capital loss (within the meaning of that term in section 842‑235 of this Act). (4) Subsection (3) does not apply if the Commissioner has reason to believe that there has been fraud by the partnership in relation to any income year. (5) Subsection (3) does not apply if before 18 December 2010 the Commissioner notified the partnership that an audit or compliance review would be undertaken in relation to any income year. ## 842‑225 Treatment of trustee of an IMR f 842‑225 Treatment of trustee of an IMR foreign fund (1) The object of this section is to ensure that the following provisions interact appropriately with the tax concessions mentioned in subsection 842‑210(1), paragraphs 842‑215(1)(a) and (b) and paragraphs 842‑220(1)(a) and (b) in respect of the 2010‑11 income year or an earlier income year: > Note: Division 6 of Part III of the Income Tax Assessment Act 1936, Division 115 of the Income Tax Assessment Act 1997, and all other provisions of those Acts apply to the trustee of an IMR foreign fund, subject to the modifications in this section. (2) This section applies to the 2010‑11 income year or an earlier income year of a trustee of a trust that is an IMR foreign fund in relation to that income year. (a) disregard a capital gain of the IMR foreign fund to the extent that the capital gain is a pre‑2012 IMR capital gain; and (b) disregard a pre‑2012 IMR capital loss of the IMR foreign fund for the purposes of determining the amount of the capital gain remaining after applying steps 1 to 4 of the method statement in subsection 102‑5(1); and (c) disregard a net capital loss of the IMR foreign fund to the extent that it is attributable to a pre‑2012 IMR capital loss for the purposes of determining how much of a capital gain that is not a pre‑2012 IMR capital gain remains after applying steps 1 to 4 of the method statement in subsection 102‑5(1). > Note: The effect of this subsection is that the increase to the assessable amount which occurs as a result of section 115‑220 of the Income Tax Assessment Act 1997 is calculated with reference to the capital gains of the IMR foreign fund that are not IMR capital gains or amounts referable to IMR capital gains (rather than by calculating the increase with reference to all capital gains of the fund). (4) For the purposes of applying section 115‑225 of the Income Tax Assessment Act 1997 in respect of section 115‑220, make the following assumptions: (a) replace the references in section 115‑225 to the net income of the trust estate with references to the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997) of the trust estate; (b) replace the references in section 115‑225 to net capital gain (if any) with a reference to pre‑2012 non‑IMR net capital gain (if any) (within the meaning of subsection 842‑240(3) of the Income Tax (Transitional Provisions) Act 1997). (5) For the purposes of applying section 98 of the Income Tax Assessment Act 1936 in respect of an income year that is the 2010‑11 income year or an earlier income year, replace references in that section to net income with references to pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997). > Note: The effect of this subsection is that where section 98 of the Income Tax Assessment Act 1936 applies to the trustee of a trust that is an IMR foreign fund, the trustee is only assessed and made liable to pay tax in respect of pre‑2012 non‑IMR net income of the fund (rather than in respect of all net income of the fund to which section 98 would otherwise apply). (6) For the purposes of applying section 99E of the Income Tax Assessment Act 1936 in respect of an income year that is the 2010‑11 income year or an earlier income year: (a) replace the reference to so much of the net income with a reference to so much of the net income or pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997) as the case may be; and (b) replace the reference to a part of the net income of another trust estate with a reference to a part of the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997) of another trust estate. > Note: The effect of this subsection is that the trustee of a trust that receives a distribution of pre‑2012 non‑IMR net income from another trust is not required to apply section 98, 99 or 99A of the Income Tax Assessment Act 1936 to those amounts. (7) The IMR foreign fund cannot utilise a tax loss or net capital loss in relation to the income year, or in any future income year, to the extent the loss is attributable to pre‑2012 IMR income, a pre‑2012 IMR capital gain, a pre‑2012 IMR deduction or a pre‑2012 IMR capital loss. ## 842‑230 Pre‑2012 IMR deduction 842‑230 Pre‑2012 IMR deduction (1) The pre‑2012 IMR deduction of an IMR foreign fund for an income year is the amount of the fund’s deductions for the income year to the extent to which they: ## 842‑235 Pre‑2012 IMR capital loss 842‑235 Pre‑2012 IMR capital loss The pre‑2012 IMR capital loss of an IMR foreign fund for an income year is the sum of the fund’s capital losses made in the income year that are attributable to CGT assets that are financial arrangements covered by section 842‑245 of the Income Tax Assessment Act 1997. ## 842‑240 Pre‑2012 non‑IMR net income, pre 842‑240 Pre‑2012 non‑IMR net income, pre‑2012 non‑IMR Division 6E net income and pre‑2012 non‑IMR net capital gain (1) A trust’s pre‑2012 non‑IMR net income in relation to an income year is determined by calculating the net income of the trust as follows: (a) for income years prior to the 2010‑11 income year—disregard the pre‑2012 IMR capital gain and pre‑2012 IMR capital loss; (c) disregard any amount that is included in the trust’s assessable income under subsection 207‑35(1) to the extent that the amount is attributable to pre‑2012 IMR income of the trust for the income year; (i) for the purposes of applying Division 6 of Part III of the Income Tax Assessment Act 1936 to the trust that is a beneficiary, replace the references in that Division to share of the net income with references to share of the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (ii) for the purposes of applying Division 6E of Part III of the Income Tax Assessment Act 1936 to the trust that is a beneficiary, replace references in that Division to Division 6E net income with references to pre‑2012 non‑IMR Division 6E net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); (e) if the trust is a partner in a partnership—for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references to the individual interest of the partner in the partnership net income or partnership loss with references to the individual interest of the partner in the pre‑2012 non‑IMR partnership net income or pre‑2012 non‑IMR partnership loss (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997). > Note: The net income of a trust may include a share of the net income of another trust. Where there is a chain of trusts, these calculations are applied to each trust in the chain. (2) A trust’s pre‑2012 non‑IMR Division 6E net income in relation to an income year is determined by calculating the Division 6E net income (within the meaning of subsection 102UY(3) of the Income Tax Assessment Act 1936) of the trust as follows: (b) disregard the things mentioned in subparagraphs 102UW(b)(i) to (iii) of the Income Tax Assessment Act 1936 (which is about adjustments of Division 6 assessable amounts) in relation to the income year. (3) A trust’s pre‑2012 non‑IMR net capital gain in relation to an income year is determined by calculating the net capital gain of the trust as follows: (b) disregard any capital gain of the trust in relation to the income year that is referable to a pre‑2012 IMR capital gain of another IMR foreign fund that is a trust. ## 842‑245 Pre‑2012 non‑IMR partnership net 842‑245 Pre‑2012 non‑IMR partnership net income and pre‑2012 non‑IMR partnership loss A partnership’s pre‑2012 non‑IMR partnership net income or pre‑2012 non‑IMR partnership loss in relation to an income year is determined by calculating the net income or partnership loss of the partnership as follows: (b) disregard any amount included in the partnership’s assessable income under subsection 207‑35(1) to the extent that the amount is attributable to pre‑2012 IMR income of the partnership for the income year; (i) for the purposes of applying Division 6 of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in that Division to share of the net income with references to share of the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (ii) for the purposes of applying Division 6E of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace references in that Division to Division 6E net income with references to pre‑2012 non‑IMR Division 6E net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); (d) if the partnership is a partner in another partnership—for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references in that Division to the individual interest of the partner in the partnership net income or partnership loss with references to the individual interest of the partner in the pre‑2012 non‑IMR partnership net income or pre‑2012 non‑IMR partnership loss (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997). > Note: The net income of a partnership may include a share of the net income of another partnership. Where there is a chain of partnerships, these calculations are applied to each partnership in the chain. ## Division 880 Sovereign entities and activities 880‑5 Certain income of sovereign entity in respect of a scheme is non‑assessable non‑exempt income if covered by a private ruling ## 880‑1 Application of Division 880 of the 880‑1 Application of Division 880 of the Income Tax Assessment Act 1997 ## 880‑5 Certain income of sovereign entity 880‑5 Certain income of sovereign entity in respect of a scheme is non‑assessable non‑exempt income if covered by a private ruling #### 880‑5 Certain income of sovereign entity in respect of a scheme is non‑assessable non‑exempt income if covered by a private ruling An amount of ordinary income or statutory income of a sovereign entity for an income year is not assessable income and is not exempt income if: (d) before 1 July 2026, the Commissioner gave the entity a private ruling confirming that income from the investment asset was not subject to income tax, or withholding tax, because of the doctrine of sovereign immunity; and regardless of whether the private ruling started to apply before 27 March 2018, or ceased to apply before 1 July 2026; and (ii) if the last income year to which the private ruling relates is a later income year than the 2025‑26 income year—that later income year, or an earlier income year. ## 880‑10 Certain amounts of sovereign enti 880‑10 Certain amounts of sovereign entity in respect of a scheme are not deductible if covered by a private ruling ## 880‑15 Sovereign entity’s capital gain f 880‑15 Sovereign entity’s capital gain from membership interest etc.—gain disregarded (c) the requirements in paragraphs 880‑5(b) to (g) are satisfied (on the assumption that references in those paragraphs to the investment asset were references to the CGT asset). ## 880‑20 Sovereign entity’s capital loss f 880‑20 Sovereign entity’s capital loss from membership interest etc.—loss disregarded Disregard a capital loss of a sovereign entity from a CGT event that happens at a time if, on the assumption that the loss were a capital gain that happened at that time, the capital gain would be disregarded because of section 880‑15. ## 880‑25 Asset of sovereign entity—deemed 880‑25 Asset of sovereign entity—deemed sale and purchase (c) before 1 July 2026, the Commissioner gave the entity a private ruling confirming that income from the asset was not subject to income tax, or withholding tax, because of the doctrine of sovereign immunity; and regardless of whether the private ruling started to apply before 27 March 2018, or ceased to apply before 1 July 2026; and (a) to have disposed of the asset, immediately before the day mentioned in subsection (5), for a consideration equal to its market value; and (b) to have acquired the asset again, immediately after the disposal mentioned in paragraph (a), for a consideration equal to the higher of the following: (b) if the asset is a revenue asset—determining whether an amount is included in, or can be deducted from, the assessable income of the entity. (a) disregard any capital gain or capital loss the sovereign entity makes because of the disposal mentioned in paragraph (2)(a); or (b) if the asset is a revenue asset—disregard any amount that could (apart from this subsection) be included in, or be deducted from, the assessable income of the entity as a result of that disposal. (i) the scheme mentioned in paragraph (1)(a) is not, when it is first carried out, materially different to the scheme specified in the private ruling; and ## Part 5 ‑35—Miscellaneous Despite section 815‑20 of the Income Tax Assessment Act 1997, the documents covered by that section for an income year that starts before 1 July 2012 are taken to be as follows: (a) the Model Tax Convention on Income and on Capital, and its Commentaries, as adopted by the Council of the Organisation for Economic Cooperation and Development and last amended before the start of the income year; (b) the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, as approved by that Council and last amended before the start of the income year. (a) a determination under subsection 815‑30(1) of the Income Tax Assessment Act 1997 has effect in relation to an entity in an income year; and (2) Subdivision 284‑C in Schedule 1 to the Taxation Administration Act 1953 applies in relation to the entity and the income year as if: (b) each other provision of a taxation law applied in relation to the entity in the way it would have if that Subdivision had not been enacted. (a) in respect of tax other than withholding tax—in relation to income years starting on or after the date mentioned in subsection (2); and (b) in respect of withholding tax—in relation to income derived, or taken to be derived, in income years starting on or after that date. (b) the day the Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Act 2013 receives the Royal Assent. (1) Subject to this section, Division 820 of the Income Tax Assessment Act 1997 applies in relation to an income year that begins on or after 1 July 2001. (2) Subdivision 820‑L of that Act, to the extent that it relates to the requirements under section 820‑960 of that Act, applies only in relation to an income year that begins on or after 1 July 2002. #### 820‑12 Application of Division 974 of the Income Tax Assessment Act 1997 for the purposes of Division 820 of that Act (1) Division 974 of the Income Tax Assessment Act 1997 applies for the purposes of determining whether, for the purposes of Division 820 of that Act, an interest is a debt interest or an equity interest at any time on or after 1 July 2001 (whether or not the debt and equity test amendments apply to transactions in relation to that interest at that time). (2) In this section, debt and equity test amendments has the same meaning as in Part 4 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001. (2) Subject to subsection (3), the entity may choose, for any or all of those income years, to use the accounting standards in force under the Corporations Act 2001 immediately before 1 January 2005 (rather than the current accounting standards) for the purpose of calculating amounts applicable to the entity under Division 820 of the Income Tax Assessment Act 1997. > Note 1: Making the choice for an income year does not require the entity to maintain a full set of accounts based on those old accounting standards. (3) If the entity makes a choice under subsection (2) for an income year but an associate entity of that entity does not, the entity may, in working out its associate entity excess amount so far as it relates to that associate entity at a time in that year, use either the accounting standards in force under the Corporations Act 2001 immediately before 1 January 2005 or the current accounting standards. (4) If an ADI makes a choice under subsection (2) for an income year, the ADI must also choose to use for that year the prudential standards in force under the Banking Act 1959 immediately before 1 January 2005 (rather than the current prudential standards) for the purpose of calculating amounts applicable to the ADI under Division 820 of the Income Tax Assessment Act 1997. > Note 1: Making the choice for an income year does not require the entity to maintain capital adequacy calculations based on those old prudential standards. (5) For an income year for which an entity does not make a choice under subsection (2), the current accounting standards will be used for the purpose of calculating amounts applicable to the entity under Division 820 of the Income Tax Assessment Act 1997. (6) For an income year for which an ADI does not make a choice under subsection (2), the current prudential standards will be used for the purpose of calculating amounts applicable to the ADI under Division 820 of the Income Tax Assessment Act 1997. (1) Division 830 of the Income Tax Assessment Act 1997 applies to assessments for the 2003‑2004 income year, and each later income year, of a taxpayer who will as a result be a partner in an entity that is a foreign hybrid in relation to that income year. (2) Division 830 of the Income Tax Assessment Act 1997 applies for the purpose of working out the attributable income, in relation to an attributable taxpayer, for: (a) the statutory accounting period that starts on 1 July 2003 or on the day on which, as a result of an election under subsection 319(2) of the Income Tax Assessment Act 1936, the statutory accounting period that would otherwise start on 1 July 2003 starts; and (c) will as a result be a partner in an entity that is a foreign hybrid in relation to that statutory accounting period; or (d) has, directly or indirectly through one or more other entities, an interest in another entity that will, as a result, be a foreign hybrid in relation to that statutory accounting period. (i) a statutory accounting period of a CFC, in relation to which the taxpayer was an attributable taxpayer at the end of that period and had an attribution percentage greater than nil, ended in the past income year; or then, for the purposes mentioned in subsection (2) of this section, the Income Tax Assessment Act 1936 applies with the modifications set out in section 830‑20 of this Act in working out: (a) any amendment of an assessment of the taxpayer for the past income year made before the commencement of this section; and (b) the making of an assessment of the taxpayer for the past income year between the commencement of this section and the end of 30 June 2004; and (d) the making of any assessment of the taxpayer for the past income year that takes place after 30 June 2004 and before the end of the time within which, if that assessment had been made on 1 July 2004, the Commissioner could amend the assessment under paragraph 170(2)(b), (c) or (d) of the Income Tax Assessment Act 1936 (as in force before the day on which the Tax Laws Amendment (Improvements to Self Assessment) Act (No. 2) 2005 received the Royal Assent); and (a) apart from this subsection, subsection (1) would apply to a taxpayer in relation to a CFC for a past income year; and (c) the taxpayer prepared the income tax return on the basis that, for the purposes of Part X of the Income Tax Assessment Act 1936, the CFC was a resident of no particular unlisted country; (d) if there is only one past income year to which paragraphs (a) to (c) of this subsection apply—the taxpayer elects that the subsection applies for the past income year; or (e) if there is more than one past income year to which paragraphs (a) to (c) of this subsection apply—the taxpayer elects that the subsection applies for all of those past income years. (1) This section sets out the modifications of the Income Tax Assessment Act 1936 that, if section 830‑15 of this Act so provides, apply in working out for a taxpayer: (2) If the CFC is not a resident of a particular listed country or a particular unlisted country for the purposes of Part X of the Income Tax Assessment Act 1936 (including after applying section 331 of that Act), then for the purposes of that Part, the CFC is taken to be a resident of the country under whose laws it was formed. (3) For the purpose of subsection 393(1) of the Income Tax Assessment Act 1936, if the taxpayer paid foreign tax (within the meaning of that Act) (the actual foreign tax) on its interest in an amount included in the notional assessable income of the CFC for the statutory accounting period, then the CFC is taken to have paid foreign tax (within the meaning of that Act) in respect of the amount equal to the actual foreign tax divided by the taxpayer’s direct attribution interest in the CFC at the end of the statutory accounting period. (a) on the assumption in paragraph 830‑15(1)(c) of this Act, another CFC (the tracing CFC) would have been a partner in the foreign entity that the CFC mentioned in subsection (1) of this section (the foreign hybrid CFC) would have been; and (b) the taxpayer had an attribution tracing interest in the tracing CFC that was taken into account in calculating the taxpayer’s attribution percentage for the foreign hybrid CFC at the end of the statutory accounting period; and (c) the tracing CFC paid foreign tax (within the meaning of that Act) (the actual foreign tax) on its interest in an amount included in the notional assessable income of the foreign hybrid CFC for the statutory accounting period; then the foreign hybrid CFC is taken to have paid foreign tax, (within the meaning of that Act) in respect of the amount included in its notional assessable income, equal to the actual foreign tax divided by the tracing CFC’s direct attribution interest in the foreign hybrid CFC at the end of the statutory accounting period. (5) For the purpose of section 573 of the Income Tax Assessment Act 1936, if the taxpayer paid foreign tax (within the meaning of that Act) (the actual foreign tax) on its interest in an amount included in the notional income of the FIF for the notional accounting period, then the FIF is taken to have paid foreign tax (within the meaning of that Act) in respect of that amount equal to the actual foreign tax divided by the attribution percentage applicable under section 581 of that Act to the taxpayer in respect of the taxpayer’s interests in the FIF at the end of the notional accounting period. (1) The Subdivisions of Division 832 of the Income Tax Assessment Act 1997 covered by subsection (2) apply to assessments for income years starting on or after 1 January 2019. (1) Subdivision 832‑H (Imported hybrid mismatch) of the Income Tax Assessment Act 1997 applies to assessments for income years starting on or after 1 January 2019. (2) However, in applying Subdivision 832‑H to assessments for income years starting before 1 January 2020, items 2 and 3 of the table in subsection 832‑615(2) are to be disregarded. (3) Despite subsection (1), Subdivision 832‑H does not apply in relation to an offshore hybrid mismatch unless a deduction component of the mismatch arose in a foreign tax period that ends in an income year starting on or after 1 January 2019. (4) In determining whether subsection (3) is satisfied in relation to an offshore hybrid mismatch, disregard section 832‑635 of the Income Tax Assessment Act 1997. (1) This section has effect for amounts represented by or reasonably attributable to fund payments made in relation to the first income year starting on or after the first 1 July after the day on which the Tax Laws Amendment (Election Commitments No. 1) Act 2008 receives the Royal Assent by a trust that is a managed investment trust in relation to that year. (2) If you are a resident of an information exchange country, subsection 840‑805(1) of the Income Tax Assessment Act 1997 does not apply to the amounts to the extent that it would otherwise apply to you. (b) if there are no taxation laws of that country applicable to the entity or the entity’s residency status cannot be determined under those laws: (ii) for another entity—the entity is incorporated or formed in that country and is carrying on a business in that country. (4) Instead, you are liable to pay income tax on the amounts (reduced as mentioned in subsection (5)) at the rate declared by the Parliament. (a) if subsection 840‑805(2) or (3) of the Income Tax Assessment Act 1997 would apply to you apart from section 840‑805 of this Act—the end of the month in which the relevant amount is paid, applied or dealt with; or (b) if subsection 840‑805(4) of that Act would so apply to you—the end of the month in which you become presently entitled to the relevant amount. (b) if an entity chooses to apply the new Subdivision 842‑I in relation to the 2011‑12, 2012‑13, 2013‑14 and 2014‑15 income years—those income years. > new Subdivision 842‑I means Subdivision 842‑I (Investment Manager Regime) of the Income Tax Assessment Act 1997, as substituted by Schedule 7 to the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015. > Note: The new Subdivision 842‑I replaced a previous version of that Subdivision, which applied in relation to assessments for the 2010‑11 income year and later income years (see item 17 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012). (b) Subdivision 842‑I (Investment Manager Regime) of the Income Tax Assessment Act 1997, as substituted by Schedule 7 to the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 (the new IMR Schedule). (a) it is an IMR entity (within the meaning given by section 842‑220 of the Income Tax Assessment Act 1997, as inserted by the new IMR Schedule); and (b) subject to subsection (3) of this section, it is an IMR widely held entity (within the meaning given by sections 842‑230 and 842‑240 of the Income Tax Assessment Act 1997, as inserted by the new IMR Schedule); and (3) Treat subsection 842‑230(1) of the Income Tax Assessment Act 1997, as inserted by the new IMR Schedule, as not applying to the entity. If an IMR entity makes a choice under paragraph 842‑208(2)(c), section 94T of the Income Tax Assessment Act 1936 as amended by Schedule 7 to the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015, applies to the entity in relation to the income years in relation to which this Subdivision applies to the entity. (1) The object of this section is to disregard, for the purpose of calculating the assessable income of a corporate tax entity that is an IMR foreign fund, certain gains and losses that arise in the 2010‑11 income year, or an earlier income year, in respect of certain kinds of financial arrangements. (b) the corporate tax entity has pre‑2012 IMR income, a pre‑2012 IMR deduction, a pre‑2012 IMR capital gain or a pre‑2012 IMR capital loss in relation to the income year; and (c) the corporate tax entity has not lodged an income tax return in relation to the 2010‑11 income year, or any earlier income year, before the day that item 1 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012 commences; and (d) the Commissioner did not, before 18 December 2010, make an assessment of the taxable income of the corporate tax entity for any income year. > Note 1: For the purposes of this Act, pre‑2012 IMR income is defined in subsections 842‑270(1) and (2) of the Income Tax Assessment Act 1997 and pre‑2012 IMR capital gain is defined in subsection 842‑270(3) of that Act. > Note 2: Pre‑2012 IMR deduction is defined in subsections 842‑230(1) and (2) of this Act and pre‑2012 IMR capital loss is defined in section 842‑235 of this Act. (4) Subsection (3) does not apply if the Commissioner has reason to believe that there has been fraud by the corporate tax entity in relation to any income year. (5) Subsection (3) does not apply if before 18 December 2010 the Commissioner notified the corporate tax entity that an audit or compliance review would be undertaken in relation to any income year. (a) a foreign resident beneficiary of an IMR foreign fund in relation to the 2010‑11 income year or an earlier income year is not subject to Australian income tax in respect of pre‑2012 IMR income or a pre‑2012 IMR capital gain of the fund (or in respect of an amount that is referable to pre‑2012 IMR income or a pre‑2012 IMR capital gain of the fund) for the income year; and (b) the foreign resident beneficiary of the fund is not able to claim a deduction or utilise a tax loss in relation to the income year to the extent that the deduction or tax loss was incurred or made in respect of an amount that is: (c) this section does not provide any tax concession to an Australian resident that invests in the fund (whether directly or indirectly through one or more interposed entities). (2) This section applies to a beneficiary of a trust in relation to the 2010‑11 income year, or an earlier income year, if: (b) the beneficiary is not a trust or partnership at any time during the income year (other than a foreign superannuation fund); and (c) neither the trust nor the beneficiary has lodged an income tax return in relation to the 2010‑11 income year, or any earlier income year, before the day that item 1 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012 commences; and > Note: A trust that is an IMR foreign fund is generally subject to the general tax rules that apply to trusts, subject to the modifications in this Subdivision: see Division 6 of Part III of the Income Tax Assessment Act 1936. Also see section 842‑225 of this Act, which deals with trustees of IMR foreign funds. (a) for the purposes of applying Division 6 of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in that Division to share of the net income with references to share of the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (b) for the purposes of applying subsections 98A(1) and (3) of Division 6 of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in those subsections to individual interest of the beneficiary in the net income with references to individual interest of the beneficiary in the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (c) for the purposes of applying Division 6E of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in that Division to Division 6E net income with references to pre‑2012 non‑IMR Division 6E net income (within the meaning of subsection 842‑240(2) of the Income Tax (Transitional Provisions) Act 1997); and (d) in applying subsection 115‑215(3) of the Income Tax Assessment Act 1997 to the beneficiary, replace the reference in that subsection to each capital gain of the trust estate with a reference to each capital gain of the trust estate that is a pre‑2012 non‑IMR net capital gain (or is referable to a pre‑2012 non‑IMR net capital gain of the trust estate) (within the meaning of subsection 842‑240(3) of the Income Tax (Transitional Provisions) Act 1997); and (i) replace references in that section to net income of the trust estate with references to pre‑2012 non‑IMR net income of the trust estate (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (ii) replace the reference in that section to net capital gain (if any) with a reference to pre‑2012 non‑IMR net capital gain (if any) (within the meaning of subsection 842‑240(3) of the Income Tax (Transitional Provisions) Act 1997). (4) For the purposes of applying paragraph 115‑225(1)(a) of the Income Tax Assessment Act 1997 to the beneficiary in respect of the income year: (a) disregard a capital gain of the trust to the extent the capital gain is a pre‑2012 IMR capital gain (or is referable to a pre‑2012 IMR capital gain of the fund); and (b) disregard a pre‑2012 IMR capital loss of the trust for the purposes of determining the amount of the capital gain remaining after applying steps 1 to 4 of the method statement in subsection 102‑5(1) of that Act; and (c) disregard a net capital loss of the trust to the extent that it is attributable to a pre‑2012 IMR capital loss for the purposes of determining the amount of the capital gain remaining after applying steps 1 to 4 of the method statement in subsection 102‑5(1). (5) Subsections (3) and (4) do not apply if the Commissioner has reason to believe that there has been fraud by the trust in relation to any income year. (6) Subsections (3) and (4) do not apply if before 18 December 2010 the Commissioner notified the trust that an audit or compliance review would be undertaken in relation to any income year. (a) a foreign resident partner of an IMR foreign fund in relation to the 2010‑11 income year, or an earlier income year, is not subject to any Australian income tax in respect of pre‑2012 IMR income or a pre‑2012 IMR capital gain (or in respect of an amount that is referable to pre‑2012 IMR income or a pre‑2012 IMR capital gain) for the income year; and (b) the foreign resident partner of the fund is not able to claim a deduction or utilise a tax loss in relation to the income year to the extent that the deduction or tax loss was incurred or made in respect of an amount that is: (c) this section does not provide any tax concession to an Australian resident that invests in the fund (whether directly or indirectly through one or more interposed entities). (2) This section applies to a partner in a partnership in relation to the 2010‑11 income year, or an earlier income year, if: (b) the partner is not a trust or a partnership at any time during the income year (other than a foreign superannuation fund); and (c) neither the partnership nor the partner has lodged an income tax return in relation to the 2010‑11 income year, or any earlier income year, before the day that item 1 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012 commences; and (d) the Commissioner did not, before 18 December 2010, make an assessment of the taxable income of the partner for any income year. > Note: A partnership that is an IMR foreign fund is generally subject to the general tax rules that apply to partnerships, subject to the modifications set out in this Subdivision: see Division 5 of Part III of the Income Tax Assessment Act 1936. (a) for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references in that Division to the individual interest of the partner in the net income of the partnership with references to the individual interest of the partner in the pre‑2012 non‑IMR partnership net income (within the meaning of section 842‑245 of the Income Tax (Transitional Provisions) Act 1997); and (b) for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references in that Division to the individual interest of the partner in the partnership loss with references to the individual interest of the partner in the pre‑2012 non‑IMR partnership loss (within the meaning of section 842‑245 of the Income Tax (Transitional Provisions) Act 1997); and (c) disregard the partner’s pre‑2012 IMR capital gain or an amount that is referable to a pre‑2012 IMR capital gain (within the meaning of subsection 842‑270(3) of the Income Tax Assessment Act 1997) or pre‑2012 IMR capital loss or an amount that is referable to a pre‑2012 IMR capital loss (within the meaning of that term in section 842‑235 of this Act). (4) Subsection (3) does not apply if the Commissioner has reason to believe that there has been fraud by the partnership in relation to any income year. (5) Subsection (3) does not apply if before 18 December 2010 the Commissioner notified the partnership that an audit or compliance review would be undertaken in relation to any income year. (1) The object of this section is to ensure that the following provisions interact appropriately with the tax concessions mentioned in subsection 842‑210(1), paragraphs 842‑215(1)(a) and (b) and paragraphs 842‑220(1)(a) and (b) in respect of the 2010‑11 income year or an earlier income year: > Note: Division 6 of Part III of the Income Tax Assessment Act 1936, Division 115 of the Income Tax Assessment Act 1997, and all other provisions of those Acts apply to the trustee of an IMR foreign fund, subject to the modifications in this section. (2) This section applies to the 2010‑11 income year or an earlier income year of a trustee of a trust that is an IMR foreign fund in relation to that income year. (a) disregard a capital gain of the IMR foreign fund to the extent that the capital gain is a pre‑2012 IMR capital gain; and (b) disregard a pre‑2012 IMR capital loss of the IMR foreign fund for the purposes of determining the amount of the capital gain remaining after applying steps 1 to 4 of the method statement in subsection 102‑5(1); and (c) disregard a net capital loss of the IMR foreign fund to the extent that it is attributable to a pre‑2012 IMR capital loss for the purposes of determining how much of a capital gain that is not a pre‑2012 IMR capital gain remains after applying steps 1 to 4 of the method statement in subsection 102‑5(1). > Note: The effect of this subsection is that the increase to the assessable amount which occurs as a result of section 115‑220 of the Income Tax Assessment Act 1997 is calculated with reference to the capital gains of the IMR foreign fund that are not IMR capital gains or amounts referable to IMR capital gains (rather than by calculating the increase with reference to all capital gains of the fund). (4) For the purposes of applying section 115‑225 of the Income Tax Assessment Act 1997 in respect of section 115‑220, make the following assumptions: (a) replace the references in section 115‑225 to the net income of the trust estate with references to the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997) of the trust estate; (b) replace the references in section 115‑225 to net capital gain (if any) with a reference to pre‑2012 non‑IMR net capital gain (if any) (within the meaning of subsection 842‑240(3) of the Income Tax (Transitional Provisions) Act 1997). (5) For the purposes of applying section 98 of the Income Tax Assessment Act 1936 in respect of an income year that is the 2010‑11 income year or an earlier income year, replace references in that section to net income with references to pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997). > Note: The effect of this subsection is that where section 98 of the Income Tax Assessment Act 1936 applies to the trustee of a trust that is an IMR foreign fund, the trustee is only assessed and made liable to pay tax in respect of pre‑2012 non‑IMR net income of the fund (rather than in respect of all net income of the fund to which section 98 would otherwise apply). (6) For the purposes of applying section 99E of the Income Tax Assessment Act 1936 in respect of an income year that is the 2010‑11 income year or an earlier income year: (a) replace the reference to so much of the net income with a reference to so much of the net income or pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997) as the case may be; and (b) replace the reference to a part of the net income of another trust estate with a reference to a part of the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997) of another trust estate. > Note: The effect of this subsection is that the trustee of a trust that receives a distribution of pre‑2012 non‑IMR net income from another trust is not required to apply section 98, 99 or 99A of the Income Tax Assessment Act 1936 to those amounts. (7) The IMR foreign fund cannot utilise a tax loss or net capital loss in relation to the income year, or in any future income year, to the extent the loss is attributable to pre‑2012 IMR income, a pre‑2012 IMR capital gain, a pre‑2012 IMR deduction or a pre‑2012 IMR capital loss. (1) The pre‑2012 IMR deduction of an IMR foreign fund for an income year is the amount of the fund’s deductions for the income year to the extent to which they: The pre‑2012 IMR capital loss of an IMR foreign fund for an income year is the sum of the fund’s capital losses made in the income year that are attributable to CGT assets that are financial arrangements covered by section 842‑245 of the Income Tax Assessment Act 1997. (1) A trust’s pre‑2012 non‑IMR net income in relation to an income year is determined by calculating the net income of the trust as follows: (a) for income years prior to the 2010‑11 income year—disregard the pre‑2012 IMR capital gain and pre‑2012 IMR capital loss; (c) disregard any amount that is included in the trust’s assessable income under subsection 207‑35(1) to the extent that the amount is attributable to pre‑2012 IMR income of the trust for the income year; (i) for the purposes of applying Division 6 of Part III of the Income Tax Assessment Act 1936 to the trust that is a beneficiary, replace the references in that Division to share of the net income with references to share of the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (ii) for the purposes of applying Division 6E of Part III of the Income Tax Assessment Act 1936 to the trust that is a beneficiary, replace references in that Division to Division 6E net income with references to pre‑2012 non‑IMR Division 6E net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); (e) if the trust is a partner in a partnership—for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references to the individual interest of the partner in the partnership net income or partnership loss with references to the individual interest of the partner in the pre‑2012 non‑IMR partnership net income or pre‑2012 non‑IMR partnership loss (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997). > Note: The net income of a trust may include a share of the net income of another trust. Where there is a chain of trusts, these calculations are applied to each trust in the chain. (2) A trust’s pre‑2012 non‑IMR Division 6E net income in relation to an income year is determined by calculating the Division 6E net income (within the meaning of subsection 102UY(3) of the Income Tax Assessment Act 1936) of the trust as follows: (b) disregard the things mentioned in subparagraphs 102UW(b)(i) to (iii) of the Income Tax Assessment Act 1936 (which is about adjustments of Division 6 assessable amounts) in relation to the income year. (3) A trust’s pre‑2012 non‑IMR net capital gain in relation to an income year is determined by calculating the net capital gain of the trust as follows: (b) disregard any capital gain of the trust in relation to the income year that is referable to a pre‑2012 IMR capital gain of another IMR foreign fund that is a trust. A partnership’s pre‑2012 non‑IMR partnership net income or pre‑2012 non‑IMR partnership loss in relation to an income year is determined by calculating the net income or partnership loss of the partnership as follows: (b) disregard any amount included in the partnership’s assessable income under subsection 207‑35(1) to the extent that the amount is attributable to pre‑2012 IMR income of the partnership for the income year; (i) for the purposes of applying Division 6 of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in that Division to share of the net income with references to share of the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (ii) for the purposes of applying Division 6E of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace references in that Division to Division 6E net income with references to pre‑2012 non‑IMR Division 6E net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); (d) if the partnership is a partner in another partnership—for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references in that Division to the individual interest of the partner in the partnership net income or partnership loss with references to the individual interest of the partner in the pre‑2012 non‑IMR partnership net income or pre‑2012 non‑IMR partnership loss (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997). > Note: The net income of a partnership may include a share of the net income of another partnership. Where there is a chain of partnerships, these calculations are applied to each partnership in the chain. 880‑5 Certain income of sovereign entity in respect of a scheme is non‑assessable non‑exempt income if covered by a private ruling #### 880‑5 Certain income of sovereign entity in respect of a scheme is non‑assessable non‑exempt income if covered by a private ruling An amount of ordinary income or statutory income of a sovereign entity for an income year is not assessable income and is not exempt income if: (d) before 1 July 2026, the Commissioner gave the entity a private ruling confirming that income from the investment asset was not subject to income tax, or withholding tax, because of the doctrine of sovereign immunity; and regardless of whether the private ruling started to apply before 27 March 2018, or ceased to apply before 1 July 2026; and (ii) if the last income year to which the private ruling relates is a later income year than the 2025‑26 income year—that later income year, or an earlier income year. (c) the requirements in paragraphs 880‑5(b) to (g) are satisfied (on the assumption that references in those paragraphs to the investment asset were references to the CGT asset). Disregard a capital loss of a sovereign entity from a CGT event that happens at a time if, on the assumption that the loss were a capital gain that happened at that time, the capital gain would be disregarded because of section 880‑15. (c) before 1 July 2026, the Commissioner gave the entity a private ruling confirming that income from the asset was not subject to income tax, or withholding tax, because of the doctrine of sovereign immunity; and regardless of whether the private ruling started to apply before 27 March 2018, or ceased to apply before 1 July 2026; and (a) to have disposed of the asset, immediately before the day mentioned in subsection (5), for a consideration equal to its market value; and (b) to have acquired the asset again, immediately after the disposal mentioned in paragraph (a), for a consideration equal to the higher of the following: (b) if the asset is a revenue asset—determining whether an amount is included in, or can be deducted from, the assessable income of the entity. (a) disregard any capital gain or capital loss the sovereign entity makes because of the disposal mentioned in paragraph (2)(a); or (b) if the asset is a revenue asset—disregard any amount that could (apart from this subsection) be included in, or be deducted from, the assessable income of the entity as a result of that disposal. (i) the scheme mentioned in paragraph (1)(a) is not, when it is first carried out, materially different to the scheme specified in the private ruling; and (1) For the purposes of subsection 960‑20(2) of the Income Tax Assessment Act 1997, a tax loss is utilised to the extent that it is carried back under former Division 160 of that Act (which provided for a corporate loss carry back tax offset). (2) For the purposes of subsection 960‑20(4) of that Act, net exempt income for an income year is utilised to the extent that, because of it, an amount was reduced under step 2 of the method statement in former subsection 160‑15(2) of that Act (which was about calculating a loss carry back tax offset component). This Subdivision has effect for the purposes of the Income Tax Assessment Act 1936, the Income Tax Assessment Act 1997, the Taxation Administration Act 1953 and this Act. (b) the scheme has been or is registered by the Australian Securities and Investments Commission under section 601EB of the Corporations Law; and (c) the entity was a managed investment scheme as mentioned in paragraph (a) at all times from the commencement of 1 July 1998 until the registration of the scheme as mentioned in paragraph (b); and (e) changes to the scheme that were necessary to be made to enable the scheme to be registered as mentioned in paragraph (b) were made during the period beginning on 1 July 1998 and ending on 30 June 2000 (the transition period); and (i) the other changes were or are made only for the purpose of improving the administration or operation of the scheme; and (ii) there were no increases in the values of the interests of any members of the scheme as a result of the other changes or, if there were any such increases, they applied proportionately to the values of the interests of all the members of the scheme; and (iii) no reductions in the values of the interests of any members of the scheme occurred as a result of the other changes; and (2) If this Subdivision applies to an entity under subsection (1) because of a particular change referred to in that subsection, it also applies because of the change to a member of the entity, in relation to the member’s interests in the entity, if the member was a member immediately before, and immediately after, the change was made. Despite the changes made as mentioned in subsection 960‑105(1) to the managed investment scheme constituted by an entity to which this Subdivision applies: (a) the entity is taken, immediately after the changes were made or, if the changes were made at different times, immediately after the last of the changes was made, to be the same entity as existed immediately before the changes were made or, if the changes were made at different times, immediately before the first of the changes was made; and (c) the beneficial ownership of the interests in the entity of a member of the entity to whom, because of a particular change, this Subdivision applies in relation to those interests is taken not to have altered as a result of the change; and (ii) in so far as this Subdivision applies to a member of the entity because of a particular change, the change is taken not to have resulted in a CGT event in respect of the member in relation to the member’s interests in the entity. A declaration made by the Commissioner for the purposes of paragraph (b) of the definition of agent in subsection 995‑1(1) of the Income Tax Assessment Act 1997 and in force immediately before the Tax Laws Amendment (2006 Measures No. 2) Act 2006 received the Royal Assent continues to have effect for the purposes of section 960‑105 of the Income Tax Assessment Act 1997. (1) Subdivision 960‑M of the Income Tax Assessment Act 1997 (about indexation) applies to assessments for the 1998‑99 income year and later income years (except so far as it affects the car depreciation limit). (2) For the car depreciation limit (see section 42‑80 of the Income Tax Assessment Act 1997), that Subdivision applies to the 1998‑99 financial year and later financial years. (a) is a share in a company that was issued or allotted to you by the company or a unit in a unit trust that was issued to you by the trustee; and (2) In working out the cost base of the cost base of the asset, you ignore subsection 960‑275(3) and use the indexation factor in subsection 960‑275(2). ## Division 909 Regulations ## 909‑1 Regulations 909‑1 Regulations ## Part 6 ‑1—Concepts and topics Despite section 815‑20 of the Income Tax Assessment Act 1997, the documents covered by that section for an income year that starts before 1 July 2012 are taken to be as follows: (a) the Model Tax Convention on Income and on Capital, and its Commentaries, as adopted by the Council of the Organisation for Economic Cooperation and Development and last amended before the start of the income year; (b) the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, as approved by that Council and last amended before the start of the income year. (a) a determination under subsection 815‑30(1) of the Income Tax Assessment Act 1997 has effect in relation to an entity in an income year; and (2) Subdivision 284‑C in Schedule 1 to the Taxation Administration Act 1953 applies in relation to the entity and the income year as if: (b) each other provision of a taxation law applied in relation to the entity in the way it would have if that Subdivision had not been enacted. (a) in respect of tax other than withholding tax—in relation to income years starting on or after the date mentioned in subsection (2); and (b) in respect of withholding tax—in relation to income derived, or taken to be derived, in income years starting on or after that date. (b) the day the Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Act 2013 receives the Royal Assent. (1) Subject to this section, Division 820 of the Income Tax Assessment Act 1997 applies in relation to an income year that begins on or after 1 July 2001. (2) Subdivision 820‑L of that Act, to the extent that it relates to the requirements under section 820‑960 of that Act, applies only in relation to an income year that begins on or after 1 July 2002. #### 820‑12 Application of Division 974 of the Income Tax Assessment Act 1997 for the purposes of Division 820 of that Act (1) Division 974 of the Income Tax Assessment Act 1997 applies for the purposes of determining whether, for the purposes of Division 820 of that Act, an interest is a debt interest or an equity interest at any time on or after 1 July 2001 (whether or not the debt and equity test amendments apply to transactions in relation to that interest at that time). (2) In this section, debt and equity test amendments has the same meaning as in Part 4 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001. (2) Subject to subsection (3), the entity may choose, for any or all of those income years, to use the accounting standards in force under the Corporations Act 2001 immediately before 1 January 2005 (rather than the current accounting standards) for the purpose of calculating amounts applicable to the entity under Division 820 of the Income Tax Assessment Act 1997. > Note 1: Making the choice for an income year does not require the entity to maintain a full set of accounts based on those old accounting standards. (3) If the entity makes a choice under subsection (2) for an income year but an associate entity of that entity does not, the entity may, in working out its associate entity excess amount so far as it relates to that associate entity at a time in that year, use either the accounting standards in force under the Corporations Act 2001 immediately before 1 January 2005 or the current accounting standards. (4) If an ADI makes a choice under subsection (2) for an income year, the ADI must also choose to use for that year the prudential standards in force under the Banking Act 1959 immediately before 1 January 2005 (rather than the current prudential standards) for the purpose of calculating amounts applicable to the ADI under Division 820 of the Income Tax Assessment Act 1997. > Note 1: Making the choice for an income year does not require the entity to maintain capital adequacy calculations based on those old prudential standards. (5) For an income year for which an entity does not make a choice under subsection (2), the current accounting standards will be used for the purpose of calculating amounts applicable to the entity under Division 820 of the Income Tax Assessment Act 1997. (6) For an income year for which an ADI does not make a choice under subsection (2), the current prudential standards will be used for the purpose of calculating amounts applicable to the ADI under Division 820 of the Income Tax Assessment Act 1997. (1) Division 830 of the Income Tax Assessment Act 1997 applies to assessments for the 2003‑2004 income year, and each later income year, of a taxpayer who will as a result be a partner in an entity that is a foreign hybrid in relation to that income year. (2) Division 830 of the Income Tax Assessment Act 1997 applies for the purpose of working out the attributable income, in relation to an attributable taxpayer, for: (a) the statutory accounting period that starts on 1 July 2003 or on the day on which, as a result of an election under subsection 319(2) of the Income Tax Assessment Act 1936, the statutory accounting period that would otherwise start on 1 July 2003 starts; and (c) will as a result be a partner in an entity that is a foreign hybrid in relation to that statutory accounting period; or (d) has, directly or indirectly through one or more other entities, an interest in another entity that will, as a result, be a foreign hybrid in relation to that statutory accounting period. (i) a statutory accounting period of a CFC, in relation to which the taxpayer was an attributable taxpayer at the end of that period and had an attribution percentage greater than nil, ended in the past income year; or then, for the purposes mentioned in subsection (2) of this section, the Income Tax Assessment Act 1936 applies with the modifications set out in section 830‑20 of this Act in working out: (a) any amendment of an assessment of the taxpayer for the past income year made before the commencement of this section; and (b) the making of an assessment of the taxpayer for the past income year between the commencement of this section and the end of 30 June 2004; and (d) the making of any assessment of the taxpayer for the past income year that takes place after 30 June 2004 and before the end of the time within which, if that assessment had been made on 1 July 2004, the Commissioner could amend the assessment under paragraph 170(2)(b), (c) or (d) of the Income Tax Assessment Act 1936 (as in force before the day on which the Tax Laws Amendment (Improvements to Self Assessment) Act (No. 2) 2005 received the Royal Assent); and (a) apart from this subsection, subsection (1) would apply to a taxpayer in relation to a CFC for a past income year; and (c) the taxpayer prepared the income tax return on the basis that, for the purposes of Part X of the Income Tax Assessment Act 1936, the CFC was a resident of no particular unlisted country; (d) if there is only one past income year to which paragraphs (a) to (c) of this subsection apply—the taxpayer elects that the subsection applies for the past income year; or (e) if there is more than one past income year to which paragraphs (a) to (c) of this subsection apply—the taxpayer elects that the subsection applies for all of those past income years. (1) This section sets out the modifications of the Income Tax Assessment Act 1936 that, if section 830‑15 of this Act so provides, apply in working out for a taxpayer: (2) If the CFC is not a resident of a particular listed country or a particular unlisted country for the purposes of Part X of the Income Tax Assessment Act 1936 (including after applying section 331 of that Act), then for the purposes of that Part, the CFC is taken to be a resident of the country under whose laws it was formed. (3) For the purpose of subsection 393(1) of the Income Tax Assessment Act 1936, if the taxpayer paid foreign tax (within the meaning of that Act) (the actual foreign tax) on its interest in an amount included in the notional assessable income of the CFC for the statutory accounting period, then the CFC is taken to have paid foreign tax (within the meaning of that Act) in respect of the amount equal to the actual foreign tax divided by the taxpayer’s direct attribution interest in the CFC at the end of the statutory accounting period. (a) on the assumption in paragraph 830‑15(1)(c) of this Act, another CFC (the tracing CFC) would have been a partner in the foreign entity that the CFC mentioned in subsection (1) of this section (the foreign hybrid CFC) would have been; and (b) the taxpayer had an attribution tracing interest in the tracing CFC that was taken into account in calculating the taxpayer’s attribution percentage for the foreign hybrid CFC at the end of the statutory accounting period; and (c) the tracing CFC paid foreign tax (within the meaning of that Act) (the actual foreign tax) on its interest in an amount included in the notional assessable income of the foreign hybrid CFC for the statutory accounting period; then the foreign hybrid CFC is taken to have paid foreign tax, (within the meaning of that Act) in respect of the amount included in its notional assessable income, equal to the actual foreign tax divided by the tracing CFC’s direct attribution interest in the foreign hybrid CFC at the end of the statutory accounting period. (5) For the purpose of section 573 of the Income Tax Assessment Act 1936, if the taxpayer paid foreign tax (within the meaning of that Act) (the actual foreign tax) on its interest in an amount included in the notional income of the FIF for the notional accounting period, then the FIF is taken to have paid foreign tax (within the meaning of that Act) in respect of that amount equal to the actual foreign tax divided by the attribution percentage applicable under section 581 of that Act to the taxpayer in respect of the taxpayer’s interests in the FIF at the end of the notional accounting period. (1) The Subdivisions of Division 832 of the Income Tax Assessment Act 1997 covered by subsection (2) apply to assessments for income years starting on or after 1 January 2019. (1) Subdivision 832‑H (Imported hybrid mismatch) of the Income Tax Assessment Act 1997 applies to assessments for income years starting on or after 1 January 2019. (2) However, in applying Subdivision 832‑H to assessments for income years starting before 1 January 2020, items 2 and 3 of the table in subsection 832‑615(2) are to be disregarded. (3) Despite subsection (1), Subdivision 832‑H does not apply in relation to an offshore hybrid mismatch unless a deduction component of the mismatch arose in a foreign tax period that ends in an income year starting on or after 1 January 2019. (4) In determining whether subsection (3) is satisfied in relation to an offshore hybrid mismatch, disregard section 832‑635 of the Income Tax Assessment Act 1997. (1) This section has effect for amounts represented by or reasonably attributable to fund payments made in relation to the first income year starting on or after the first 1 July after the day on which the Tax Laws Amendment (Election Commitments No. 1) Act 2008 receives the Royal Assent by a trust that is a managed investment trust in relation to that year. (2) If you are a resident of an information exchange country, subsection 840‑805(1) of the Income Tax Assessment Act 1997 does not apply to the amounts to the extent that it would otherwise apply to you. (b) if there are no taxation laws of that country applicable to the entity or the entity’s residency status cannot be determined under those laws: (ii) for another entity—the entity is incorporated or formed in that country and is carrying on a business in that country. (4) Instead, you are liable to pay income tax on the amounts (reduced as mentioned in subsection (5)) at the rate declared by the Parliament. (a) if subsection 840‑805(2) or (3) of the Income Tax Assessment Act 1997 would apply to you apart from section 840‑805 of this Act—the end of the month in which the relevant amount is paid, applied or dealt with; or (b) if subsection 840‑805(4) of that Act would so apply to you—the end of the month in which you become presently entitled to the relevant amount. (b) if an entity chooses to apply the new Subdivision 842‑I in relation to the 2011‑12, 2012‑13, 2013‑14 and 2014‑15 income years—those income years. > new Subdivision 842‑I means Subdivision 842‑I (Investment Manager Regime) of the Income Tax Assessment Act 1997, as substituted by Schedule 7 to the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015. > Note: The new Subdivision 842‑I replaced a previous version of that Subdivision, which applied in relation to assessments for the 2010‑11 income year and later income years (see item 17 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012). (b) Subdivision 842‑I (Investment Manager Regime) of the Income Tax Assessment Act 1997, as substituted by Schedule 7 to the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 (the new IMR Schedule). (a) it is an IMR entity (within the meaning given by section 842‑220 of the Income Tax Assessment Act 1997, as inserted by the new IMR Schedule); and (b) subject to subsection (3) of this section, it is an IMR widely held entity (within the meaning given by sections 842‑230 and 842‑240 of the Income Tax Assessment Act 1997, as inserted by the new IMR Schedule); and (3) Treat subsection 842‑230(1) of the Income Tax Assessment Act 1997, as inserted by the new IMR Schedule, as not applying to the entity. If an IMR entity makes a choice under paragraph 842‑208(2)(c), section 94T of the Income Tax Assessment Act 1936 as amended by Schedule 7 to the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015, applies to the entity in relation to the income years in relation to which this Subdivision applies to the entity. (1) The object of this section is to disregard, for the purpose of calculating the assessable income of a corporate tax entity that is an IMR foreign fund, certain gains and losses that arise in the 2010‑11 income year, or an earlier income year, in respect of certain kinds of financial arrangements. (b) the corporate tax entity has pre‑2012 IMR income, a pre‑2012 IMR deduction, a pre‑2012 IMR capital gain or a pre‑2012 IMR capital loss in relation to the income year; and (c) the corporate tax entity has not lodged an income tax return in relation to the 2010‑11 income year, or any earlier income year, before the day that item 1 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012 commences; and (d) the Commissioner did not, before 18 December 2010, make an assessment of the taxable income of the corporate tax entity for any income year. > Note 1: For the purposes of this Act, pre‑2012 IMR income is defined in subsections 842‑270(1) and (2) of the Income Tax Assessment Act 1997 and pre‑2012 IMR capital gain is defined in subsection 842‑270(3) of that Act. > Note 2: Pre‑2012 IMR deduction is defined in subsections 842‑230(1) and (2) of this Act and pre‑2012 IMR capital loss is defined in section 842‑235 of this Act. (4) Subsection (3) does not apply if the Commissioner has reason to believe that there has been fraud by the corporate tax entity in relation to any income year. (5) Subsection (3) does not apply if before 18 December 2010 the Commissioner notified the corporate tax entity that an audit or compliance review would be undertaken in relation to any income year. (a) a foreign resident beneficiary of an IMR foreign fund in relation to the 2010‑11 income year or an earlier income year is not subject to Australian income tax in respect of pre‑2012 IMR income or a pre‑2012 IMR capital gain of the fund (or in respect of an amount that is referable to pre‑2012 IMR income or a pre‑2012 IMR capital gain of the fund) for the income year; and (b) the foreign resident beneficiary of the fund is not able to claim a deduction or utilise a tax loss in relation to the income year to the extent that the deduction or tax loss was incurred or made in respect of an amount that is: (c) this section does not provide any tax concession to an Australian resident that invests in the fund (whether directly or indirectly through one or more interposed entities). (2) This section applies to a beneficiary of a trust in relation to the 2010‑11 income year, or an earlier income year, if: (b) the beneficiary is not a trust or partnership at any time during the income year (other than a foreign superannuation fund); and (c) neither the trust nor the beneficiary has lodged an income tax return in relation to the 2010‑11 income year, or any earlier income year, before the day that item 1 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012 commences; and > Note: A trust that is an IMR foreign fund is generally subject to the general tax rules that apply to trusts, subject to the modifications in this Subdivision: see Division 6 of Part III of the Income Tax Assessment Act 1936. Also see section 842‑225 of this Act, which deals with trustees of IMR foreign funds. (a) for the purposes of applying Division 6 of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in that Division to share of the net income with references to share of the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (b) for the purposes of applying subsections 98A(1) and (3) of Division 6 of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in those subsections to individual interest of the beneficiary in the net income with references to individual interest of the beneficiary in the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (c) for the purposes of applying Division 6E of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in that Division to Division 6E net income with references to pre‑2012 non‑IMR Division 6E net income (within the meaning of subsection 842‑240(2) of the Income Tax (Transitional Provisions) Act 1997); and (d) in applying subsection 115‑215(3) of the Income Tax Assessment Act 1997 to the beneficiary, replace the reference in that subsection to each capital gain of the trust estate with a reference to each capital gain of the trust estate that is a pre‑2012 non‑IMR net capital gain (or is referable to a pre‑2012 non‑IMR net capital gain of the trust estate) (within the meaning of subsection 842‑240(3) of the Income Tax (Transitional Provisions) Act 1997); and (i) replace references in that section to net income of the trust estate with references to pre‑2012 non‑IMR net income of the trust estate (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (ii) replace the reference in that section to net capital gain (if any) with a reference to pre‑2012 non‑IMR net capital gain (if any) (within the meaning of subsection 842‑240(3) of the Income Tax (Transitional Provisions) Act 1997). (4) For the purposes of applying paragraph 115‑225(1)(a) of the Income Tax Assessment Act 1997 to the beneficiary in respect of the income year: (a) disregard a capital gain of the trust to the extent the capital gain is a pre‑2012 IMR capital gain (or is referable to a pre‑2012 IMR capital gain of the fund); and (b) disregard a pre‑2012 IMR capital loss of the trust for the purposes of determining the amount of the capital gain remaining after applying steps 1 to 4 of the method statement in subsection 102‑5(1) of that Act; and (c) disregard a net capital loss of the trust to the extent that it is attributable to a pre‑2012 IMR capital loss for the purposes of determining the amount of the capital gain remaining after applying steps 1 to 4 of the method statement in subsection 102‑5(1). (5) Subsections (3) and (4) do not apply if the Commissioner has reason to believe that there has been fraud by the trust in relation to any income year. (6) Subsections (3) and (4) do not apply if before 18 December 2010 the Commissioner notified the trust that an audit or compliance review would be undertaken in relation to any income year. (a) a foreign resident partner of an IMR foreign fund in relation to the 2010‑11 income year, or an earlier income year, is not subject to any Australian income tax in respect of pre‑2012 IMR income or a pre‑2012 IMR capital gain (or in respect of an amount that is referable to pre‑2012 IMR income or a pre‑2012 IMR capital gain) for the income year; and (b) the foreign resident partner of the fund is not able to claim a deduction or utilise a tax loss in relation to the income year to the extent that the deduction or tax loss was incurred or made in respect of an amount that is: (c) this section does not provide any tax concession to an Australian resident that invests in the fund (whether directly or indirectly through one or more interposed entities). (2) This section applies to a partner in a partnership in relation to the 2010‑11 income year, or an earlier income year, if: (b) the partner is not a trust or a partnership at any time during the income year (other than a foreign superannuation fund); and (c) neither the partnership nor the partner has lodged an income tax return in relation to the 2010‑11 income year, or any earlier income year, before the day that item 1 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012 commences; and (d) the Commissioner did not, before 18 December 2010, make an assessment of the taxable income of the partner for any income year. > Note: A partnership that is an IMR foreign fund is generally subject to the general tax rules that apply to partnerships, subject to the modifications set out in this Subdivision: see Division 5 of Part III of the Income Tax Assessment Act 1936. (a) for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references in that Division to the individual interest of the partner in the net income of the partnership with references to the individual interest of the partner in the pre‑2012 non‑IMR partnership net income (within the meaning of section 842‑245 of the Income Tax (Transitional Provisions) Act 1997); and (b) for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references in that Division to the individual interest of the partner in the partnership loss with references to the individual interest of the partner in the pre‑2012 non‑IMR partnership loss (within the meaning of section 842‑245 of the Income Tax (Transitional Provisions) Act 1997); and (c) disregard the partner’s pre‑2012 IMR capital gain or an amount that is referable to a pre‑2012 IMR capital gain (within the meaning of subsection 842‑270(3) of the Income Tax Assessment Act 1997) or pre‑2012 IMR capital loss or an amount that is referable to a pre‑2012 IMR capital loss (within the meaning of that term in section 842‑235 of this Act). (4) Subsection (3) does not apply if the Commissioner has reason to believe that there has been fraud by the partnership in relation to any income year. (5) Subsection (3) does not apply if before 18 December 2010 the Commissioner notified the partnership that an audit or compliance review would be undertaken in relation to any income year. (1) The object of this section is to ensure that the following provisions interact appropriately with the tax concessions mentioned in subsection 842‑210(1), paragraphs 842‑215(1)(a) and (b) and paragraphs 842‑220(1)(a) and (b) in respect of the 2010‑11 income year or an earlier income year: > Note: Division 6 of Part III of the Income Tax Assessment Act 1936, Division 115 of the Income Tax Assessment Act 1997, and all other provisions of those Acts apply to the trustee of an IMR foreign fund, subject to the modifications in this section. (2) This section applies to the 2010‑11 income year or an earlier income year of a trustee of a trust that is an IMR foreign fund in relation to that income year. (a) disregard a capital gain of the IMR foreign fund to the extent that the capital gain is a pre‑2012 IMR capital gain; and (b) disregard a pre‑2012 IMR capital loss of the IMR foreign fund for the purposes of determining the amount of the capital gain remaining after applying steps 1 to 4 of the method statement in subsection 102‑5(1); and (c) disregard a net capital loss of the IMR foreign fund to the extent that it is attributable to a pre‑2012 IMR capital loss for the purposes of determining how much of a capital gain that is not a pre‑2012 IMR capital gain remains after applying steps 1 to 4 of the method statement in subsection 102‑5(1). > Note: The effect of this subsection is that the increase to the assessable amount which occurs as a result of section 115‑220 of the Income Tax Assessment Act 1997 is calculated with reference to the capital gains of the IMR foreign fund that are not IMR capital gains or amounts referable to IMR capital gains (rather than by calculating the increase with reference to all capital gains of the fund). (4) For the purposes of applying section 115‑225 of the Income Tax Assessment Act 1997 in respect of section 115‑220, make the following assumptions: (a) replace the references in section 115‑225 to the net income of the trust estate with references to the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997) of the trust estate; (b) replace the references in section 115‑225 to net capital gain (if any) with a reference to pre‑2012 non‑IMR net capital gain (if any) (within the meaning of subsection 842‑240(3) of the Income Tax (Transitional Provisions) Act 1997). (5) For the purposes of applying section 98 of the Income Tax Assessment Act 1936 in respect of an income year that is the 2010‑11 income year or an earlier income year, replace references in that section to net income with references to pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997). > Note: The effect of this subsection is that where section 98 of the Income Tax Assessment Act 1936 applies to the trustee of a trust that is an IMR foreign fund, the trustee is only assessed and made liable to pay tax in respect of pre‑2012 non‑IMR net income of the fund (rather than in respect of all net income of the fund to which section 98 would otherwise apply). (6) For the purposes of applying section 99E of the Income Tax Assessment Act 1936 in respect of an income year that is the 2010‑11 income year or an earlier income year: (a) replace the reference to so much of the net income with a reference to so much of the net income or pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997) as the case may be; and (b) replace the reference to a part of the net income of another trust estate with a reference to a part of the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997) of another trust estate. > Note: The effect of this subsection is that the trustee of a trust that receives a distribution of pre‑2012 non‑IMR net income from another trust is not required to apply section 98, 99 or 99A of the Income Tax Assessment Act 1936 to those amounts. (7) The IMR foreign fund cannot utilise a tax loss or net capital loss in relation to the income year, or in any future income year, to the extent the loss is attributable to pre‑2012 IMR income, a pre‑2012 IMR capital gain, a pre‑2012 IMR deduction or a pre‑2012 IMR capital loss. (1) The pre‑2012 IMR deduction of an IMR foreign fund for an income year is the amount of the fund’s deductions for the income year to the extent to which they: The pre‑2012 IMR capital loss of an IMR foreign fund for an income year is the sum of the fund’s capital losses made in the income year that are attributable to CGT assets that are financial arrangements covered by section 842‑245 of the Income Tax Assessment Act 1997. (1) A trust’s pre‑2012 non‑IMR net income in relation to an income year is determined by calculating the net income of the trust as follows: (a) for income years prior to the 2010‑11 income year—disregard the pre‑2012 IMR capital gain and pre‑2012 IMR capital loss; (c) disregard any amount that is included in the trust’s assessable income under subsection 207‑35(1) to the extent that the amount is attributable to pre‑2012 IMR income of the trust for the income year; (i) for the purposes of applying Division 6 of Part III of the Income Tax Assessment Act 1936 to the trust that is a beneficiary, replace the references in that Division to share of the net income with references to share of the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (ii) for the purposes of applying Division 6E of Part III of the Income Tax Assessment Act 1936 to the trust that is a beneficiary, replace references in that Division to Division 6E net income with references to pre‑2012 non‑IMR Division 6E net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); (e) if the trust is a partner in a partnership—for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references to the individual interest of the partner in the partnership net income or partnership loss with references to the individual interest of the partner in the pre‑2012 non‑IMR partnership net income or pre‑2012 non‑IMR partnership loss (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997). > Note: The net income of a trust may include a share of the net income of another trust. Where there is a chain of trusts, these calculations are applied to each trust in the chain. (2) A trust’s pre‑2012 non‑IMR Division 6E net income in relation to an income year is determined by calculating the Division 6E net income (within the meaning of subsection 102UY(3) of the Income Tax Assessment Act 1936) of the trust as follows: (b) disregard the things mentioned in subparagraphs 102UW(b)(i) to (iii) of the Income Tax Assessment Act 1936 (which is about adjustments of Division 6 assessable amounts) in relation to the income year. (3) A trust’s pre‑2012 non‑IMR net capital gain in relation to an income year is determined by calculating the net capital gain of the trust as follows: (b) disregard any capital gain of the trust in relation to the income year that is referable to a pre‑2012 IMR capital gain of another IMR foreign fund that is a trust. A partnership’s pre‑2012 non‑IMR partnership net income or pre‑2012 non‑IMR partnership loss in relation to an income year is determined by calculating the net income or partnership loss of the partnership as follows: (b) disregard any amount included in the partnership’s assessable income under subsection 207‑35(1) to the extent that the amount is attributable to pre‑2012 IMR income of the partnership for the income year; (i) for the purposes of applying Division 6 of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in that Division to share of the net income with references to share of the pre‑2012 non‑IMR net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); and (ii) for the purposes of applying Division 6E of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace references in that Division to Division 6E net income with references to pre‑2012 non‑IMR Division 6E net income (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997); (d) if the partnership is a partner in another partnership—for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references in that Division to the individual interest of the partner in the partnership net income or partnership loss with references to the individual interest of the partner in the pre‑2012 non‑IMR partnership net income or pre‑2012 non‑IMR partnership loss (within the meaning of subsection 842‑240(1) of the Income Tax (Transitional Provisions) Act 1997). > Note: The net income of a partnership may include a share of the net income of another partnership. Where there is a chain of partnerships, these calculations are applied to each partnership in the chain. 880‑5 Certain income of sovereign entity in respect of a scheme is non‑assessable non‑exempt income if covered by a private ruling #### 880‑5 Certain income of sovereign entity in respect of a scheme is non‑assessable non‑exempt income if covered by a private ruling An amount of ordinary income or statutory income of a sovereign entity for an income year is not assessable income and is not exempt income if: (d) before 1 July 2026, the Commissioner gave the entity a private ruling confirming that income from the investment asset was not subject to income tax, or withholding tax, because of the doctrine of sovereign immunity; and regardless of whether the private ruling started to apply before 27 March 2018, or ceased to apply before 1 July 2026; and (ii) if the last income year to which the private ruling relates is a later income year than the 2025‑26 income year—that later income year, or an earlier income year. (c) the requirements in paragraphs 880‑5(b) to (g) are satisfied (on the assumption that references in those paragraphs to the investment asset were references to the CGT asset). Disregard a capital loss of a sovereign entity from a CGT event that happens at a time if, on the assumption that the loss were a capital gain that happened at that time, the capital gain would be disregarded because of section 880‑15. (c) before 1 July 2026, the Commissioner gave the entity a private ruling confirming that income from the asset was not subject to income tax, or withholding tax, because of the doctrine of sovereign immunity; and regardless of whether the private ruling started to apply before 27 March 2018, or ceased to apply before 1 July 2026; and (a) to have disposed of the asset, immediately before the day mentioned in subsection (5), for a consideration equal to its market value; and (b) to have acquired the asset again, immediately after the disposal mentioned in paragraph (a), for a consideration equal to the higher of the following: (b) if the asset is a revenue asset—determining whether an amount is included in, or can be deducted from, the assessable income of the entity. (a) disregard any capital gain or capital loss the sovereign entity makes because of the disposal mentioned in paragraph (2)(a); or (b) if the asset is a revenue asset—disregard any amount that could (apart from this subsection) be included in, or be deducted from, the assessable income of the entity as a result of that disposal. (i) the scheme mentioned in paragraph (1)(a) is not, when it is first carried out, materially different to the scheme specified in the private ruling; and (1) For the purposes of subsection 960‑20(2) of the Income Tax Assessment Act 1997, a tax loss is utilised to the extent that it is carried back under former Division 160 of that Act (which provided for a corporate loss carry back tax offset). (2) For the purposes of subsection 960‑20(4) of that Act, net exempt income for an income year is utilised to the extent that, because of it, an amount was reduced under step 2 of the method statement in former subsection 160‑15(2) of that Act (which was about calculating a loss carry back tax offset component). This Subdivision has effect for the purposes of the Income Tax Assessment Act 1936, the Income Tax Assessment Act 1997, the Taxation Administration Act 1953 and this Act. (b) the scheme has been or is registered by the Australian Securities and Investments Commission under section 601EB of the Corporations Law; and (c) the entity was a managed investment scheme as mentioned in paragraph (a) at all times from the commencement of 1 July 1998 until the registration of the scheme as mentioned in paragraph (b); and (e) changes to the scheme that were necessary to be made to enable the scheme to be registered as mentioned in paragraph (b) were made during the period beginning on 1 July 1998 and ending on 30 June 2000 (the transition period); and (i) the other changes were or are made only for the purpose of improving the administration or operation of the scheme; and (ii) there were no increases in the values of the interests of any members of the scheme as a result of the other changes or, if there were any such increases, they applied proportionately to the values of the interests of all the members of the scheme; and (iii) no reductions in the values of the interests of any members of the scheme occurred as a result of the other changes; and (2) If this Subdivision applies to an entity under subsection (1) because of a particular change referred to in that subsection, it also applies because of the change to a member of the entity, in relation to the member’s interests in the entity, if the member was a member immediately before, and immediately after, the change was made. Despite the changes made as mentioned in subsection 960‑105(1) to the managed investment scheme constituted by an entity to which this Subdivision applies: (a) the entity is taken, immediately after the changes were made or, if the changes were made at different times, immediately after the last of the changes was made, to be the same entity as existed immediately before the changes were made or, if the changes were made at different times, immediately before the first of the changes was made; and (c) the beneficial ownership of the interests in the entity of a member of the entity to whom, because of a particular change, this Subdivision applies in relation to those interests is taken not to have altered as a result of the change; and (ii) in so far as this Subdivision applies to a member of the entity because of a particular change, the change is taken not to have resulted in a CGT event in respect of the member in relation to the member’s interests in the entity. A declaration made by the Commissioner for the purposes of paragraph (b) of the definition of agent in subsection 995‑1(1) of the Income Tax Assessment Act 1997 and in force immediately before the Tax Laws Amendment (2006 Measures No. 2) Act 2006 received the Royal Assent continues to have effect for the purposes of section 960‑105 of the Income Tax Assessment Act 1997. (1) Subdivision 960‑M of the Income Tax Assessment Act 1997 (about indexation) applies to assessments for the 1998‑99 income year and later income years (except so far as it affects the car depreciation limit). (2) For the car depreciation limit (see section 42‑80 of the Income Tax Assessment Act 1997), that Subdivision applies to the 1998‑99 financial year and later financial years. (a) is a share in a company that was issued or allotted to you by the company or a unit in a unit trust that was issued to you by the trustee; and (2) In working out the cost base of the cost base of the asset, you ignore subsection 960‑275(3) and use the indexation factor in subsection 960‑275(2). ## Division 960 General ## Subdivision 960 ‑B—Utilisation of tax attributes ## 960‑20 Utilisation—corporate loss carry 960‑20 Utilisation—corporate loss carry back (1) For the purposes of subsection 960‑20(2) of the Income Tax Assessment Act 1997, a tax loss is utilised to the extent that it is carried back under former Division 160 of that Act (which provided for a corporate loss carry back tax offset). (2) For the purposes of subsection 960‑20(4) of that Act, net exempt income for an income year is utilised to the extent that, because of it, an amount was reduced under step 2 of the method statement in former subsection 160‑15(2) of that Act (which was about calculating a loss carry back tax offset component). ## Subdivision 960 ‑E—Entities ## 960‑100 Effect of this Subdivision 960‑100 Effect of this Subdivision This Subdivision has effect for the purposes of the Income Tax Assessment Act 1936, the Income Tax Assessment Act 1997, the Taxation Administration Act 1953 and this Act. ## 960‑105 Entities, and members of entitie 960‑105 Entities, and members of entities, benefiting from the application of this Subdivision (b) the scheme has been or is registered by the Australian Securities and Investments Commission under section 601EB of the Corporations Law; and (c) the entity was a managed investment scheme as mentioned in paragraph (a) at all times from the commencement of 1 July 1998 until the registration of the scheme as mentioned in paragraph (b); and (e) changes to the scheme that were necessary to be made to enable the scheme to be registered as mentioned in paragraph (b) were made during the period beginning on 1 July 1998 and ending on 30 June 2000 (the transition period); and (i) the other changes were or are made only for the purpose of improving the administration or operation of the scheme; and (ii) there were no increases in the values of the interests of any members of the scheme as a result of the other changes or, if there were any such increases, they applied proportionately to the values of the interests of all the members of the scheme; and (iii) no reductions in the values of the interests of any members of the scheme occurred as a result of the other changes; and (2) If this Subdivision applies to an entity under subsection (1) because of a particular change referred to in that subsection, it also applies because of the change to a member of the entity, in relation to the member’s interests in the entity, if the member was a member immediately before, and immediately after, the change was made. ## 960‑110 No taxation consequences to resu 960‑110 No taxation consequences to result from changes to managed investment scheme Despite the changes made as mentioned in subsection 960‑105(1) to the managed investment scheme constituted by an entity to which this Subdivision applies: (a) the entity is taken, immediately after the changes were made or, if the changes were made at different times, immediately after the last of the changes was made, to be the same entity as existed immediately before the changes were made or, if the changes were made at different times, immediately before the first of the changes was made; and (c) the beneficial ownership of the interests in the entity of a member of the entity to whom, because of a particular change, this Subdivision applies in relation to those interests is taken not to have altered as a result of the change; and (ii) in so far as this Subdivision applies to a member of the entity because of a particular change, the change is taken not to have resulted in a CGT event in respect of the member in relation to the member’s interests in the entity. ## 960‑115 Certain entities treated as agen 960‑115 Certain entities treated as agents A declaration made by the Commissioner for the purposes of paragraph (b) of the definition of agent in subsection 995‑1(1) of the Income Tax Assessment Act 1997 and in force immediately before the Tax Laws Amendment (2006 Measures No. 2) Act 2006 received the Royal Assent continues to have effect for the purposes of section 960‑105 of the Income Tax Assessment Act 1997. ## Subdivision 960 ‑M—Indexation ## 960‑262 Application of Subdivision 960‑M 960‑262 Application of Subdivision 960‑M of the Income Tax Assessment Act 1997 (1) Subdivision 960‑M of the Income Tax Assessment Act 1997 (about indexation) applies to assessments for the 1998‑99 income year and later income years (except so far as it affects the car depreciation limit). (2) For the car depreciation limit (see section 42‑80 of the Income Tax Assessment Act 1997), that Subdivision applies to the 1998‑99 financial year and later financial years. ## 960‑275 Indexation factor 960‑275 Indexation factor (a) is a share in a company that was issued or allotted to you by the company or a unit in a unit trust that was issued to you by the trustee; and (2) In working out the cost base of the cost base of the asset, you ignore subsection 960‑275(3) and use the indexation factor in subsection 960‑275(2).